Document of The World Bank Report No: ICR00001043 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-33700) ON A CREDIT IN THE AMOUNT OF SDR 7.1 MILLION (US$ 9.42 MILLION EQUIVALENT) TO THE KYRGYZ REPUBLIC FOR A LAND AND REAL ESTATE REGISTRATION PROJECT June 25, 2009 Sustainable Development Sector Unit Central Asia Country Unit Europe and Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2008) Currency Unit = Som KGS 1.00 = US$ 0.03 US$ 1.00 = KGS 39.18 SDR 1.00 = US$1.56 US$ 1.00 = SDR 0.64 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS ARS Automated Registration System ASSP Agricultural Support Services Project BTI Bureaus of Technical Inventory CAS Country Assistance Strategy CDS Country Development Strategy CIS Commonwealth of Independent States CODB Cost of Doing Business CSO Civil Society Organization ECA Europe and Central Asia ERR Economic Rate of Return GDP Gross Domestic Product GNP Gross National Product Gosregister State Agency for Registration of Rights in Immovable Property IDA International Development Association IMF International Monetary Fund IP Implementation Performance IT Information Technology JCSS Joint Country Support Strategy KAFC Kyrgyz Agricultural Finance Corporation LRERP Land and Real Estate Registration Project LRO Land Registry Office M&E Monitoring and Evaluation MTR Medium-Term Review NGO Non-Governmental Organization OECD Organization for Economic Co-operation and Development PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit PRGF Poverty Reduction Growth Facility Program QAG Quality Assurance Group QSA6 Quality of Supervision Assessment 6 RDF Rural Development Fund SA Social Assessment Sida Swedish International Development Cooperation Agency SLRERP Second Land and Real Estate Registration Project TOR Terms of Reference USAID United States Agency for International Development Vice President: Shigeo Katsu Country Director: Motoo Konishi Sector Manager: John Kellenberg Project Team Leader: Jessica Mott ICR Team Leader: Ed Cook KYRGYZ REPUBLIC LAND AND REAL ESTATE REGISTRATION PROJECT CONTENTS Data Sheet A. Basic Information ..............................................................................i B. Key Dates....................................................................................... i C. Ratings Summary...............................................................................i D. Sector and Theme Codes......................................................................ii E. Bank Staff.......................................................................................ii F. Results Framework Analysis..................................................................ii G. Ratings of Project Performance in ISRs...................................................vi H. Restructuring (if any).........................................................................vi I. Disbursement Profile.........................................................................vii Main Report 1. Project Context, Development Objectives and Design...............................................1 2. Key Factors Affecting Implementation and Outcomes...............................................4 3. Assessment of Outcomes ............................................................................................8 4. Assessment of Risk to Development Outcome.........................................................13 5. Assessment of Bank and Borrower Performance......................................................14 6. Lessons Learned........................................................................................................19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...........20 Annex 1. Project Costs and Financing..........................................................................23 Annex 2. Outputs by Component..................................................................................24 Annex 3. Economic and Financial Analysis .................................................................25 Annex 4. Bank Lending and Implementation Support/Supervision Processes.............36 Annex 5. Beneficiary Survey Results ...........................................................................38 Annex 6. Stakeholder Workshop Report and Results...................................................42 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR .....................43 Annex 8. List of Supporting Documents.......................................................................60 MAP A. Basic Information Land & Real Estate Country: Kyrgyz Republic Project Name: Registration Project Project ID: P049719 L/C/TF Number(s): IDA-33700 ICR Date: 06/26/2009 ICR Type: Core ICR Lending Instrument: SIL Borrower: KYRGYZ REPUBLIC Original Total XDR 7.1M Disbursed Amount: XDR 7.1M Commitment: Environmental Category: C Implementing Agencies: Gosregister Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 06/14/1999 Effectiveness: 09/14/2000 Appraisal: 10/25/1999 Restructuring(s): Approval: 06/06/2000 Mid-term Review: Closing: 12/31/2005 12/31/2008 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Highly Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Highly Satisfactory Overall Bank Overall Borrower Performance: Satisfactory Performance: Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project No Quality at Entry None at any time (Yes/No): (QEA): i Problem Project at any Quality of No Satisfactory time (Yes/No): Supervision (QSA): DO rating before Highly Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 100 100 Theme Code (as % of total Bank financing) Administrative and civil service reform 25 10 Land administration and management 25 50 Legal institutions for a market economy 25 15 Personal and property rights 25 25 E. Bank Staff Positions At ICR At Approval Vice President: Shigeo Katsu Johannes F. Linn Country Director: Motoo Konishi Kiyoshi Kodera Sector Manager: John V. Kellenberg Joseph R. Goldberg Project Team Leader: Jessica Mott Edward C. Cook ICR Team Leader: Jessica Mott ICR Primary Author: Edward C. Cook F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To support development of markets for land and real estate and the more intensive and effective use of land and real estate through the introduction of a reliable and well- functioning system for registration of rights in immovable property. Revised Project Development Objectives (as approved by original approving authority) N/A ii (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : PAD: Property rights clear and secure. PAD: 600,000 Most private REUs in properties No registry of rights for settlement areas. registered. In settlement lands. Share March 2004 settlement areas Value certificates for updated target: 1,254,682 real quantitative or agricultural lands. All complete estate units (REUs) Qualitative) land and real estate registration of registered records incomplete, private REUs in (including 661,890 scattered and settlement areas REUs regularized). inaccessible. and large portion Outside settlement of non-settlement areas 1,251,085 areas. REUs registered. Date achieved 12/31/2000 12/31/2005 08/30/2008 Comments (incl. % Exceeded original expectations by a multiple of four. achievement) Indicator 2 : Increase access to credit. Continued growth in number and 48,430 mortgages Value value of valued at 1.347 quantitative or Mortgage market not mortgages, subject billion equivalent Qualitative) operational. to continued enabling registered during conditions in the 2008. banking system. Date achieved 12/31/2000 12/31/2005 12/31/2008 Comments (incl. % Although targets were not specified, the actual achievements were very high. achievement) Indicator 3 : Improved functioning of, and access to, sales and long-term lease markets. Continued growth Very limited sales and of registered sales 43,716 sales and Value leases in settlement areas. and leases, subject 4,859 leases, and quantitative or No sales and limited to continuing 12,327 inheritances Qualitative) leases in agricultural economic growth and gifts registered areas. and political during 2008. stability. Date achieved 12/31/2000 12/31/2005 12/31/2008 Comments (incl. % Very positive achievement given KG#s overall level of development. achievement) Indicator 4 : Improved information base for, and access to, fiscal and land administration iii cadastres. PAD: Cadastre for settlement areas using exiting base Cadastre for Value mapping settlement areas quantitative or Records incomplete and established. established and Qualitative) scattered. Revised: Cadastre information readily also expanded to accessible through rural lands registry offices. without buildings. Date achieved 12/31/2000 12/31/2005 12/31/2008 Comments (incl. % achievement) Indicator 5 : Sustainable system. Simplified registry Simplified procedures, procedures, pragmatic parcel pragmatic surveys, survey, growth in transaction growth, Value transactions, and and good man. have quantitative or No registration system. performance enabled nominal Qualitative) management self-financing, enable self- reasonable fees, financing at and org. stability in reasonable fees for all 50 offices, after service. downsizing 9 offices. Date achieved 12/31/2000 12/31/2005 12/31/2008 Comments (incl. % achievement) (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Indicator 1 : Registry offices established. First phase offices Value opened by Dec 31, All 50 offices (quantitative No registry offices. 2000, second opened in timely or Qualitative) phase by July 31, 2001 and all by fashion. Dec 31, 2001 Date achieved 12/31/2000 12/30/2001 12/31/2008 Comments (incl. % achievement) iv Indicator 2 : Full legislative, regulatory, and procedural framework for operation of registry system. Registry office regulations issued Regulations and Value PAD: Basic law issued by July 1, 2000 procedures revised (quantitative and draft regulations and and procedures for in timely fashion or Qualitative) procedures developed. sales, lease and and subsequently mortgages revised further improved. by July 1, 2002 Date achieved 12/31/2000 12/31/2005 12/31/2008 Comments (incl. % achievement) Indicator 3 : Well-founded valuation methodologies established and in use at local level. Acceptable market- oriented valuation methodologies submitted to No market-oriented Parliament for Value valuation methodology-- Number of consideration. Data (quantitative valuation practices based jusidictions collected during or Qualitative) on Soviet command and utilizing approved systematic control economy. methodologies registration and then updated to meet requirements of a new different law involving the whole tax code. Date achieved 12/31/2000 12/31/2005 12/31/2008 Comments (incl. % achievement) Indicator 4 : Management capacity established to oversee registration system and encourage development of markets. Effective functioning of PIU and Gosregister. Value Capacity Excellent (quantitative Very limited capacity. established management or Qualitative) through rigorous capacity and training and oversight. exposure to international good practice. Date achieved 12/31/2000 12/31/2005 12/31/2008 Comments (incl. % achievement) v G. Ratings of Project Performance in ISRs Actual No. Date ISR Archived DO IP Disbursements (USD millions) 1 06/29/2000 Satisfactory Satisfactory 0.00 2 08/23/2000 Satisfactory Satisfactory 0.00 3 12/06/2000 Satisfactory Satisfactory 0.49 4 04/06/2001 Satisfactory Satisfactory 0.64 5 08/27/2001 Satisfactory Satisfactory 0.96 6 12/20/2001 Satisfactory Satisfactory 1.38 7 04/11/2002 Satisfactory Satisfactory 1.87 8 08/27/2002 Satisfactory Satisfactory 2.84 9 12/11/2002 Satisfactory Satisfactory 3.22 10 04/28/2003 Satisfactory Satisfactory 3.55 11 10/07/2003 Satisfactory Satisfactory 3.88 12 11/13/2003 Satisfactory Satisfactory 4.28 13 03/29/2004 Satisfactory Satisfactory 4.60 14 08/19/2004 Satisfactory Satisfactory 5.03 15 11/11/2004 Highly Satisfactory Highly Satisfactory 5.34 16 03/28/2005 Highly Satisfactory Highly Satisfactory 5.85 17 06/22/2005 Highly Satisfactory Highly Satisfactory 6.23 18 12/12/2005 Highly Satisfactory Highly Satisfactory 6.93 19 02/28/2006 Highly Satisfactory Highly Satisfactory 7.03 20 08/21/2006 Highly Satisfactory Highly Satisfactory 7.74 21 03/09/2007 Highly Satisfactory Highly Satisfactory 8.76 22 10/10/2007 Highly Satisfactory Highly Satisfactory 9.48 23 02/28/2008 Highly Satisfactory Highly Satisfactory 9.90 24 10/16/2008 Highly Satisfactory Highly Satisfactory 10.02 H. Restructuring (if any) Not Applicable vi I. Disbursement Profile vii 1. PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN 1.1 Context at Appraisal The Kyrgyz Republic suffered through a period of economic contraction following attainment of independence in the early 1990's. While the Government was committed to transition to a market-based economy, the country lacked both the legal and institutional basis for this to be readily achieved. Immovable property, representing the major share of the capital assets of the country, figured as a key element of the economic reform strategy. However, there were multiple agencies involved in maintaining data on immovable property, with no coordination among them. While private property rights had been legally recognized for land and buildings in preceding legislative reform, there was no legal or institutional basis for registering or protecting those rights in an efficient and unambiguous manner, nor was there a supporting policy basis for the development of immovable property markets. The lack of inter-agency coordination also hindered Government efforts to properly administer land and real estate. The strategic objectives of the Country Assistance Strategy (CAS) at the time were to: (i) attain sustained economic growth, particularly through focus on agricultural growth; (ii) reduce poverty; (iii) improve governance; and (iv) strengthen public finances. At the time of appraisal, the Project was seen as a potential direct contributor to achieving the first and fourth objectives, and as indirectly addressing the second and third. The Bank coordinated with other donors leading up to appraisal. USAID had conducted a small pilot project testing techniques for the collection of data necessary for systematic property registration and had taken a lead role in drafting a Land Registration Law. The Bank assisted in preparing that draft and took a lead role in discussions with Government concerning institutional arrangements for a land and real estate registration system. The Bank had become increasingly involved with registration and cadastre operations in many countries, and specifically elsewhere in the Commonwealth of Independent States (CIS), and was recognized by Government as being uniquely qualified to assist in establishment of the Kyrgyz land and real estate registration system. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The Project Development Objective (PDO) was to support development of markets for land and real estate and the more intensive and effective use of land and real estate through the introduction of a reliable and well-functioning system for registration of rights in immovable property. It was understood that key indicators for this objective would be increased level of activity in sales and mortgage markets. However, the Project Appraisal Document (PAD) did not specify quantified indicators for these. The PAD did specify achievement of high service standards for the registration system (3 days to register for secondary transactions) that would move the Kyrgyz Republic ahead of many developed market economies to the top rank internationally for this measure. The PAD also contained a key output indicator of 600,000 properties (of a total of 2.5 million properties nationwide) to be covered by systematic registration. 1 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification N/A 1.4 Main Beneficiaries The target population identified in the PAD was those who hold rights in land and real estate or who would like to acquire such rights. Other identified beneficiaries were those wanting to make use of the information base to be developed by the Project. Among this broad set of beneficiaries, it is worth noting a number of subsets with more specific potential gains from the Project. This would include: (i) the poor, who would gain Government protection of their rights and avoid the costs associated with initial registration thanks to the program of systematic registration; (ii) professionals involved in real estate markets, such as real estate agents and banks; (iii) those interested in utilizing their property as collateral for loans; and (iv) municipal and higher levels of government in need of a unified information base on immovable property. 1.5 Original Components The Project was composed of three components: (a) institutional development, (b) operational services, and (c) training. (a) Institutional Development ­ The primary purpose of this component was to get the national land and real estate registration system established and running smoothly and to address improvements in the procedures associated with transactions. The component also included operation of the Project Implementation Unit within the State Agency for Registration of Rights in Immovable Property (Gosregister). The specific activities enumerated in the PAD were to: · establish management capacity at national level to supervise, monitor and promote the registration system nationwide, to encourage development of the land and real estate market, and to monitor and evaluate project progress; · set up registration offices throughout the country and implement sporadic (on demand) registration in each office; · provide a full legislative, regulatory and procedural framework for operation of the registration offices; · coordinate with Government agencies, notaries and other land and real estate professionals in order to implement straightforward and effective processes for conducting transactions; and · coordinate with Government concerning establishment of a well-founded fiscal cadastre. (b) Operational Services ­ This component focused on provision of data to the registration offices, primarily through conducting a program of systematic registration. The specific activities enumerated in the PAD were to: · conduct a public awareness and communication campaign that will include professional organizations, Government, and the general public; · create a series of registration index maps for each Registration office through a mixture of new mapping, revised mapping and use of existing mapping; · carry out data collection from organizations with records relating to rights in land and real estate and archiving of these records at the relevant Registration office; and 2 · conduct systematic adjudication of rights and registration of rights in accordance with an agreed schedule. (c) Training ­ Under the project, training programs for the following groups of stakeholders were anticipated: (1) staff of Gosregister; (2) individuals and firms hired to conduct systematic registration; and (3) representatives of local government, civil society, and organizations whose activity is tied with registration of rights in immovable property. The specific activities enumerated in the PAD were to: · establish training centers for the ongoing in-service training of Registration office staff and personnel involved in the Project; · establish a training program, professional organizations and other activities for the promotion of real estate markets; and · establish a long term training program to cater to the future needs of Gosregister and a private professional capacity in land and real estate markets. 1.6 Revised Components N/A 1.7 Other significant changes While there was no formal revision of the Project, there were a number of changes in design and, scope deserving note. Soon after Board approval, the Swedish International Development Cooperation Agency (Sida) agreed to finance the technical assistance elements of the Project, which were estimated at appraisal at US$700,000. Parallel financing from Sida for technical assistance continued through the life of the Project. In December 2004 a two-year extension of the original project closing date of December 31, 2005 was approved. This allowed Gosregister to expand the program of systematic registration to include agricultural lands that were not included in the original project design. This program of `rural' systematic registration entailed the use of slightly different field methodologies than the urban program, and benefited from the agricultural land reform work undertaken as part of the Agriculture Support Services Project (ASSP). The ASSP had assisted the large farming collectives that had existed under Soviet times to carry out a program of distribution of land shares to members of the collective. This documentation was then used in the `rural' systematic registration under the Project. The appraised version of the Project had focused on the paper-based system of registration, with limited expenditures for automation or development of a unified computerized system. As implementation moved forward, and the paper-based system was successfully designed and rolled out, the Bank agreed to increased attention to development of automated registration at the Local Registration Offices (LROs) as well as conceptual design of a nationwide automated land information system. On November 22, 2007, a second one-year extension in the project closing date was approved by the VP to allow financial bridging to the follow-on Second Land and Real Estate Registration Project (SLRERP). 3 2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES 2.1 Project Preparation, Design and Quality at Entry The Task Team was careful to ensure that two key pillars for successful land registration projects were in place prior to appraisal. These were: (1) establishment of a reliable legal basis for registration; and (2) clarification of institutional roles in operation of the system. This required more time than originally planned for preparation of the Project, but was critical for project success. As reflected in the PAD, the team also drew critical lessons from earlier operations globally and with specific reference to the ECA region. Among these were the importance of stand-alone projects as opposed to a land registration component of a larger project, the advantages of a single agency design (where both cadastral and registration functions are handled under one roof), the potential pitfalls of focusing on technology and high standards of land parcel survey, and, particularly in the case of Europe and Central Asia (ECA), the tendency for borrowers to consider the government rather than the population as the key beneficiary of the Project. The most important factor bearing on the quality of project preparation and design was the nature of Government commitment, and in particular, the emergence of a well-placed "champion" who took strong leadership responsibility for laying a solid foundation for project implementation. Through partnership with this key counterpart, the Bank was able to get agreement on the important issues of project objective and design, and institutional roles, in particular establishment of the single-agency model. Government commitment went beyond the issue of a project champion. The Project was treated as a priority by the Ministry of Finance and necessary actions from Government's side, in particular policy adjustments and clarifications, were forthcoming. The resulting project design was relatively simple and straightforward. The PDO of stimulating development of land and real estate markets was clear, though ambitious. In fact, the Project could only play a supporting role in achieving this objective. Its attainment was dependent on the broader macro-economic situation and on policy decisions beyond the project's scope. However, aiming for something less ambitious would have brought the PDO into the range of direct project outputs rather than outcomes. The project design incorporated to a very large extent existing capacities with respect to immovable property. Gosregister was established on the basis of the previous Bureaus of Technical Inventory (BTIs), a Soviet era organization responsible for tracking information on residential properties, and the State Land Agency, responsible for land management and administration, primarily in rural areas. Data were pulled from these two bodies, as well as other sources, in establishing the immovable property data base for the Project. The Project was able to benefit in particular from the broad coverage of topographic mapping of adequate scale that was produced during the Soviet period and that was still relatively current. A Social Assessment (SA) was conducted during preparation that included a survey questionnaire, focus group discussions, in-depth informant interviews and participant observation in the BTI and State Land Agency offices. This was followed by a final stakeholder workshop in Bishkek. The main findings of the SA were incorporated in the project design. 4 The PAD identified a broad set of potential project risks and included reasonable corresponding mitigation measures. Overall, project risks were rated as "substantial" due primarily to uncertainties in the macro-economic setting, and to potential problems in further elaboration of the legal and regulatory environment necessary for facilitating market growth. 2.2 Implementation Government commitment to the Project continued through the implementation phase. Appropriate macro-economic and sectoral policies conducive to achievement of the PDO were adopted or adhered to. Key staffing decisions remained positive and constructive during nearly the entire period of implementation. One problem area was the lack of necessary counterpart funds in the first two years of implementation, which had a retarding influence on the pace of implementation with respect to operational expenditures and civil works. The original Director of Gosregister played a critical role in getting the new registration system up and running, in introducing system performance improvements over time, and in managing the highly successful program of systematic registration. A modest sized Project Implementation Unit (PIU) was established within Gosregister to manage the day-to-day aspects of the Project, reporting to Gosregister's Deputy Director for Registration. Staffing of the PIU was generally good to very good. At the time of appraisal, Gosregister did not have adequate staffing slots to manage the Project. In addition, restrictions on civil service pay would have made the attraction of high quality project staff very difficult, if not impossible. Quality of service standards and governance were major issues that needed to be dealt with during implementation. As noted in the original SA, the governance and performance standards of the agencies that were combined to form Gosregister were not high. This was a situation that was prevalent throughout Government. With project support and in accordance with its design, Gosregister implemented a number of measures to establish and maintain high quality service standards, to reduce the opportunities for corruption, collusion, and fraud, and to increase accountability. These included: (i) an extensive country-wide awareness campaign during the initial years of the Project and then again at the local level immediately prior to initiating systematic registration efforts in a given locale which did an effective job of informing citizens about their rights, as well as processes for systematic registration and subsequent transactions; (ii) collaborative arrangements with non profit groups providing legal aid related to land and real estate issues, including facilitating working space in some local registry offices, exchanging data, and involving these groups in consultations; (iii) a simplified registration process; (iv) posting information on fees, documents, processing times, procedural requirements, etc. in the registry reception areas; (v) official premium fees for urgent service; (vi) the Gosregister institutional motto "honesty and competence"; (vii) a complaint box; a rigorous monitoring system; clear physical and procedural separation of front office (customer interaction) and back office (registration and archiving) functions thereby separating processors from customers. 5 (viii) use of registry revenue to increase staff pay for good performance and thereby creating an incentive for honesty; (ix) a quantitative and qualitative survey of customer opinions covering the areas of all local registries conducted as the Project was nearing completion; and (x) an ongoing program of staff monitoring, training, and where necessary, replacement. These efforts are remarkable, especially in the broader Central Asian context where corruption is common, and anti-corruption measures tend to be weak. Gosregister and the PIU were also successful in managing the program of systematic registration. The approach of low-cost, pragmatic methods that was agreed at appraisal was pushed even farther during implementation. For example, it was found that data on apartment units could be accessed on a large-scale basis through coordination with the various communal housing authorities. Field methods associated with the program were also refined and improved to increase productivity. As a result, the pace of the systematic registration program ran well ahead of the appraisal estimates. The target of 600,000 urban property units registered was reached early in the third year of implementation and at a much lower cost per property than anticipated. While there was no formal mid-term review, there was discussion during regular supervision missions about allowing the systematic registration programs to continue operation in the urban areas beyond the agreed target. Subsequently, Government expressed interest in expanding systematic registration to agricultural areas. This was fully in keeping with the PDO and the component design of the Project. To conduct the proposed rural program required an extension of the project closing date of two years. Preliminary agreement was reached during the September/October 2004 supervision mission and a Letter of Notification of Extension Date was issued in December 2004. In retrospect, these changes should perhaps have been subject to a formal restructuring which explicitly approved this use of project savings. However, the Project was regarded as highly successful by both the Government and the Bank and an informal restructuring was viewed as adequate. Gosregister and the Bank agreed to a cautious, gradually intensifying approach for using Information Technology (IT) to support and operate its registration system. The register was first established in a manual form and IT was applied only for data acquisition. A digital register database was created and finally a full fledged automated registration system (ARS) was introduced. ARS initially operated in parallel to the manual system, but has been adopted as the legal register in the capital, Bishkek, and two other large offices. It will eventually become the legal register across the country. The application for the map data integration to ARS is under development. The gradual approach, especially considering the questions of capacity and resources, ensured reliable registration operations at all times while allowing progress towards a modern and efficient registration system. Technical assistance made an important contribution to the Project during implementation. There have been two Sida-funded technical assistance programs to Gosregister. The first, running from 2000 to 2006, was to provide direct support to implement the activities under the Project, and involved technical assistance with systematic registration, establishment of land 6 registry offices, development of a cadastral manual, and training in new processes and procedures. This included study tours to Sweden and Lithuania that were highly instructive. The annual cost of the first Sida-funded program was roughly US$450,000. The second program, running from 2006 to 2009, has provided technical assistance in areas such as mapping, cadastral surveying, law, information technology and valuation. The annual cost of the second phase programs increased to nearly US$700,000. The Sida-funded consulting team was closely involved with supervision missions, and developed its annual work programs in coordination with input from Gosregister and the Bank task team. The Project would not have been able to accomplish what it did without the parallel involvement of Sida. Even though the project results targets were already achieved by the end of calendar 2007 (including the target of registering rural areas which had been added in association with the initial two year extension of the closing date), the closing date was further extended for a third year in order to enable continuity of project management capacity for the follow-on project. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization A monitoring and evaluation system relied on six regional monitoring officers that were responsible for regular site visits to the 50 local registration offices. These regional officers reported to the national Monitoring and Evaluation (M&E) officer in the PIU, submitting reports regularly in an agreed format. The M&E system was geared to tracking project outputs as well as data on project outcomes, and also tracked progress in putting in place the components of project implementation. Despite a lack of clarity in the PAD with respect to quantified indicators for the PDO, tracking of the number of sales and mortgages, and the value of the latter was initiated at the local level early in project implementation. Information on key project outputs was also tracked including the number of sporadic registration of rights, the number of property units covered by systematic registration, the number of properties for which title was regularized (cases with incomplete or contradictory documentation), and the number of unresolved cases. During the process of monitoring of the systematic registration program, regional specialists not only controlled the quality and the speed of works on systematic registration, but also organized meetings and gatherings with communities, villagers and local government employees. Further, regional monitoring specialists coordinated interaction between local registration offices, local government, and city administrations. This arrangement served as the key to the success of the systematic registration of land shares. Indicators were tracked concerning the quality of services provided, including the number of complaints lodged, and spot checks were made during site visits on consistency with agreed registration procedures, including transparency of registration and pricing. All information about customer interface was analyzed by the regional monitoring specialists and was then submitted to the PIU and Gosregister management. The simple and straightforward design of the Project allowed for and M&E system with clearly defined indicators which can be used to track trends. The quality of the data was cross checked during site visits by supervision missions and found to be reliable. Data on the PDO indicators were consistent with other information available on the development of immovable property markets. In particular, the data on mortgages were closely scrutinized by the Bank's task team, with cross checks made through the Rural Finance II Project. 7 Sustainability of the M&E system will require mainstreaming the functions of the monitoring officers directly into Gosregister. Work on this is included in the follow-on Second Land and Real Estate Registration Project (SLRERP). Completion of the program of systematic registration will reduce the ongoing M&E costs for the registration system and should ease the process of mainstreaming. 2.4 Safeguard and Fiduciary Compliance The Project did not involve any safeguard policies. There was limited amount of office repair and small scale reconstruction, which at the time of appraisal rated a category C for Environmental Assessment. It did not involve involuntary resettlement, natural habitats, or forest areas. The financial management system was run by the PIU and performed well during the life of the Project. It was capable of recording all transactions and balances, and supported the preparation of regular financial statements that were submitted to the Bank on time. Internal control systems and procedures established by the PIU ensured the reliability of accounting records, and safeguarding of the Project's resources and assets. 2.5 Post-completion Operation/Next Phase While many issues of sustainability were addressed by the first Project, some will receive additional attention in the SLRERP. These include mainstreaming of the functions of the PIU into Gosregister, further elaboration of the financial sustainability arrangements of the registration system (in particular financing system overhead costs that have been financed by IDA), and further capacity building focusing on spatial data, computerized systems, and registration in informal settlements. The majority of local registry offices (being state-owned enterprises) are now self-financing out of revenues generated from services rendered. However, operations of Gosregister headquarters have been financed by a combination of regular government budget, contributions as part of surplus distribution from local registry offices, and the IDA LRERP Credit and the IDA SLRERP Grant (for PIU activities including all local consultants). Under SLRERP, alternative arrangements will be developed to enable registry revenue to be used to finance key functions related to the entire network, such as performance monitoring and IT support. Agency practices including financial management and procurement for registry operations, records management, and support for strategy development and communications also require improvement. Some types of real property still need to be included in the registry system ­ these include properties in some of the "novostroiki" (informal urban settlement) areas as well as non-private lands and real estate such as urban parks, government properties, land around apartments, and pastures. Cadastral mapping also needs to be gradually upgraded. 3. ASSESSMENT OF OUTCOMES 3.1 Relevance of Objectives, Design and Implementation Development of land and real estate markets through establishment of a reliable system for registration of rights in immovable property has remained a high priority for the Kyrgyz Republic throughout the implementation phase of the Project. The Government's Country 8 Development Strategy (CDS) for 2007-2010 focuses on four strategic pillars ­ growth-oriented economic development and improving the business environment, governance and transparency in public administration, human development, and environmental sustainability. The Kyrgyz Government has identified that a reliable and well-functioning system for registration of rights in immovable property remains a key government priority in the CDS, and important for private sector development in both rural and urban areas as well as for public sector management. The recently approved Joint Country Support Strategy (JCSS) for 2007-2010, which builds on the Government's development goals as described in the CDS, contains three key objectives: (a) economic management consistent with strong and sustained pro-poor growth; (b) reducing corruption, improving governance, and effective public administration; and (c) building sustainable human and social capital through education. The project targeting of security of property rights and the performance of property markets, and of improving the quality and transparency of government services remains relevant to this agenda. 3.2 Achievement of Project Development Objectives The Project achieved its development objective of supporting development of markets for land and real estate and the more intensive and effective use of land and real estate. The number of mortgages, which were virtually nil prior to the Project, reached a cumulative annual total of 22,400 in the year 2002, the first year when most of the registration offices were operational, and doubled to 45,300 in the year 2007. The cumulative value of mortgages registered within a one period increased by more than 10 times between 2002 and 2007 to reach US$1.1 billion, roughly one-third the value of annual Gross Domestic Product (GDP) for the country. Most of these mortgages were short term loans backed by immovable property as collateral. In 2007, outstanding (longer-term) residential mortgages were valued at US$87 million, or roughly 2.6% of GDP compared with virtually nothing prior to the Project. Underlying this growth in mortgage market activity was the growth in average property values, which increased from slightly less than US$5,000 in 2002 to over US$30,000 in 2007. Sales markets also roughly doubled between 2002 and 2007, going from 25,900 sales at the beginning of the period to 48,100 at the end. 60000 50000 40000 Year 30000 sales mortgages 20000 10000 0 2001 2002 2003 2004 2005 2006 2007 2008 Most of the growth in immovable property markets to this point has been concentrated in urban areas. This in part reflects government restrictions on the sale of agricultural land that persisted until late in the life of the Project. These restrictions were motivated by concerns about possible distress sales and accumulation of agricultural land holdings that would have negative social 9 impacts in the rural areas. Evidence from the Rural Finance II Project shows, however, that much of the short term mortgaging has been used for agricultural purposes, where residential properties have been utilized as collateral. Until more than mid-way through project implementation, the Kyrgyz Agricultural Finance Corporation (KAFC), which was established with World Bank assistance under the Rural Finance I Project, was the primary source of mortgage money extended in the country. The Project played a direct contributory role to this economic development. Lending institutions require documentation of ownership rights from the registration system prior to considering any mortgage lending application. The fact that the Project was able to: (a) establish a reliable and trusted system of registration of title, and (b) carry out systematic registration of nearly all properties in the country over the relatively short time span, provided a necessary basis for property market development. Other essential conditions for market development had been established prior to appraisal: instituting private property rights and putting in place policies conducive to property market functioning. Most of these policy changes were motivated by considerations broader than the scope of the LRERP. However, the rationale and promise of the Project helped direct this policy thinking. Preparation of the LRERP and development of the Registration Law was carried out in the context of a broader dialogue on establishment of a market based economy. As noted above, the Project also benefited from the policy and institution building work carried out by the Rural Finance I and Rural Finance II Projects. The linkage between Project outputs and outcomes is illustrated by the accomplishment in the area of systematic registration. At the time of appraisal a target of 600,000 properties was set for the systematic registration program. This was in keeping with benchmarks for similar programs in other countries with respect to both per property cost and the relatively weak and untested institutional capacity. This target was greatly exceeded thanks to the efforts of the implementing agency, Gosregister, and the supporting commitment from Government. The actual number of properties covered by systematic registraton exceeded 2.5 million by the project closing, leaving slightly more than 200,000 properties for which contradictory information on current rights requires further deliberation prior to title registration. A significant accomplishment of the Project was that of the 2.5 million properties registered, over 600,000 had lacked full documentation, but as part of the program had these uncertainties dealt with and title conferred. The extension of the closing date by a total of three years allowed time for conducting the program of systematic registration of agricultural land. During those three years, roughly 1.25 million rural land parcels were registered. The rapid pace of the rural program was facilitated in part by work undertaken by the ASSP, which had assisted Government in a program of restructuring the large farming collectives and had issued land share documents to farmers well ahead of the initiation of the rural systematic registration program. The LRERP also achieved its target of establishing high standards of service delivery for the registration system. The PAD had established an ambitious target of three days for completion of registration. Spot checking during supervision shows that this target has largely been met. The Cost of Doing Business (CODB) survey includes indicators for registration of property, based on the example of a medium size business in proximity to the national capital. CODB shows a total of eight days for registration in the Kyrgyz Republic, which ranks 17th internationally, well ahead of the average of 30 days for the Organization for Economic Co- operation and Development (OECD) countries. Considering that CODB includes steps prior to registration proper, such as collection of necessary documentation and other Government 10 clearances, the CODB case study is in line with supervision findings of the time required for registration. A good deal of work was done under the LRERP on property valuation methodologies, and input provided along with other stakeholders on development of legislation on an immovable property tax. Both Sida, through its involvement on the Project, and USAID through its advisory services to the Treasury of the Kyrgyz Republic, were active in this area. The PIU established a small unit to work on property valuation questions. This work eventually became well advanced. The PAD noted that implementation of the valuation methodologies would require adoption of regulations that are beyond the scope of the Project. In fact, consideration of property tax legislation and supporting implementing regulations became hung up in Parliament for political reasons and had not been adopted by the close of the LRERP. 3.3 Efficiency An Economic Rate of Return (ERR) for such a project is extremely challenging to carry out due to the complex and broad economic impacts of a registration system. Examination on the basis of cost effectiveness clearly shows the high level of efficiency achieved by the Project. About two thirds of the project costs were devoted to systematic registration, the rest being devoted to establishment and operation of the registration system itself. With 2.5 million properties registered, the per property cost of the systematic registration program comes to about US$2.75. By international comparison, this is very low compared with costs within ECA which can range from an average of $5 per parcel in the Caucasus to around $120 per parcel in the Balkans. Furthermore, there is no evidence of any problems relating to disputes, either legal or in boundaries. While the very low wage cost and the inclusion of apartments (for which separate land parcel surveys are not required), contributed to this result, management attention to efficiency also played a significant role. Achieving an average cost as low as in the LRERP has rarely been accomplished in international practice. As a result of simplifying previous steps and procedures, the cost of land-related transactions (e.g., notary fees, "State Duty", and registration fees) in the Kyrgyz Republic has been brought down from over 7 percent to a negligible level. Currently, land related transaction costs are estimated at less than 2 percent of property value for large and expensive estate and less than 1 percent for houses and apartments. This compares with a regional average of 2.7 to 4.3% in OECD countries. 3.4 Justification of Overall Outcome Rating Rating: Highly Satisfactory The development rationale behind the Project remained relevant throughout implementation and continues to be relevant. A reliable system for registration of immovable property rights is a key building block of a well functioning market economy. The development of land and real estate markets was achieved, as evidenced by the increased number of secondary transactions (sales), and more intensive use of land and real estate was achieved through the development of mortgage - as evidenced by the number and value of mortgages. The establishment of a reliable and well-functioning system was supported by the creation of a country-wide registration network and development of a full regulatory and procedural framework for transactions allowing for registration to take place in a matter of days. This places the Kyrgyz Republic 11 among the top tier of countries internationally. Of particular note in comparison with other countries in the region and internationally is the growth in the mortgage market during project implementation. This was accomplished at a comparatively low cost. In particular, the per property costs of the systematic registration program are among the lowest in international practice. While the growth of real property markets was dependent on economic factors well beyond the scope of the Project, the Project did all that could be expected to facilitate this expansion. In terms of relevance, achievement of the PDO, and efficiency, the Project performed at a level consistent with a highly satisfactory rating. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The Project did not specifically target these social objectives. It did have positive impacts, however. With respect to poverty, registration of rights for virtually the entire country will protect the economically disadvantaged from potential loss of their land and housing rights that might otherwise occur without a reliable registration system. Initial (systematic) registration was carried out at Government expense. The high rate of regularization of property rights also contributed to the poverty impact. Subsequent transactions can be registered at a reasonable cost that will allow the lowest income groups to continue to benefit from the system. The Registration Law provides for equal treatment of rights held by women. For example, spouses and minors are protected and notaries have been required to ensure this protection. Examination of actual operation of the registration system has confirmed that equal treatment of women in practice. However, there are differences in the extent to which men versus women hold land or real estate (and therefore are Gosregister customers), which result from the wider cultural and socioeconomic context of the country. There are issues of discrepancies between the formal law and customary law, primarily in rural areas, where women's rights to land in situations of family break-up or inheritance are not secured under customary practices. Sida financed gender awareness training for Gosregister staff, and these issues will need to be tracked in the future. (b) Institutional Change/Strengthening Establishment of Gosregister and the system of local registration offices represents a significant accomplishment in terms of institutional development in the Kyrgyz Republic. A lot of effort was made to establish Gosregister's identy and move the staff from the old BTI and Land Agency to one office in a new location in each municipality. These offices included specific physical design features to promote good governance and client service. Training and new operational procedures were also stressed. It is a case where a significant qualitative advance has been made over the institutional structures, client interface, and government service standards that were inherited from the Soviet period and that were still prevalent at the time project implementation commenced. It is recognized by Government as a good case of successful capacity building and institutional development that can serve as a model over the longer term. (c) Other Unintended Outcomes and Impacts (positive or negative) The establishment of Gosregister through the merger of the BTIs and the State Land Agency created a body with a broad mandate on land issues. Gosregister was simultaneously responsible for registering rights and for land management functions that had a direct bearing on the creation 12 or modification of rights. In many other countries these two functions are handled by separate agencies. A number of Non-Government Organizations (NGOs) and donors were critical of this arrangement and argued to shift functions out of Gosregister to avoid this potential conflict of interest. The Bank understood the basis of these concerns and in discussions with Gosregister pointed out that a mandate this broad was not considered international best practice. The Bank did not insist on an institutional restructuring, but remained on alert to evidence on any actual abuse of powers. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops A beneficiary survey was conducted in 2007 under the auspices of the Bank-Netherlands Partnership Program to assess client attitudes toward the registration system. Client feedback indicated general satisfaction with operation of the registration offices, which was a distinct improvement over the findings of the initial Social Assessment that was carried out in 1999. In 2007 services of Gosregister were rated as "average" by clients. There was widespread satisfaction with the speed of service, the fees were considered affordable and reasonable, and the level of physical accessibility of the registration offices was rated as quite good. The value of Gosregister's mission to facilitate the property markets was largely recognized. There were high rates of understanding and use of Gosregister to secure ownership rights and utilize its services for credit. Gosregister was also seen as being generally fair in dealing with clients. At the same time, areas for further attention were identified. These included greater accountability of staff for quality of work, the need for more training and retraining opportunities, and for more effective information and public outreach. About 1/3 of clients and organizations thought that there was corruption, and about half of these reported directly encountering it. Some professional organizations cited making regular informal payments for services. Respondents who reported on informal payments indicated that they were in regards to accelerating service delivery, not to altering the content of the rights being registered or already registered. Use of the guarantee fund is virtually nil due to lack of applications. On other complaints, clients indicated a lack of recourse to appeal decisions taken by Gosregister. Further work on checks and balances concerning decisions about registration, and accountability for mistakes is needed. (See Annex 5 for a fuller discussion of the results of the beneficiary survey.). 4. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME Rating: Moderate Gosregister has successfully maintained its institutional integrity. However, there is an ongoing risk of politicization of the organization that would hinder the efficiency, quality, and reliability of the registration system. This could come in the form of inappropriate management appointments or in the introduction of policies that would not be conducive to the continued effective functioning of the system. High level dialogue between the Government and the Bank, if necessary, on the importance of maintaining the integrity of the system would be the most effective way of addressing this risk. Trends in the overall macro economic situation or disruptions to the financial sector could have an impact on future property market development. Impact of the global economic and financial 13 crisis is already having an impact in the Kyrgyz Republic. Introduction of policies that are not conducive to property market activity could also have a negative impact on maintenance or expansion of the development accomplishments of the Project. While it is difficult to address global influences, Government has demonstrated a continuous commitment to appropriate economic, financial, and sector policies that would likely minimize the negative impacts of broader economic influences over the longer term. There will be a need for a continuous effort to address staff capacity and to deal with governance and corruption issues within the system. Though this is tied to the broader question of institutional integrity, it will need to be addressed regardless of any other possible developments bearing on the future of the registration system. This will mean maintenance and development of appropriate training programs, regular independent reviews or audits of performance of the registration system, and elaboration of appropriate human resource policies. The follow-on Project will be addressing these issues during its implementation. The follow-on Project will also be assisting Gosregister in further elaboration of a financial sustainability model for the registration system. While much progress has been made under the LRERP, there are still some elements of financial sustainability, including provision of services to the low-volume rayons and integration of PIU functions into Gosregister, that need to be dealt with. 5. ASSESSMENT OF BANK AND BORROWER PERFORMANCE 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The Bank played a key role during project preparation in guiding Government on fundamental issues of establishing a title registration system and in best practices with respect to project design. As discussed in Section 2.1 above, the Bank team took the time to ensure that essential pillars of future project success ­ a solid legal foundation, and clarification of institutional roles ­ were in place prior to appraisal. In 1997, tGovernment was not keen on the project idea, and there was little resonance with counterparts in various potential implementing agencies on the importance of the possible market development impacts. Perseverance by the Task Team, combined with coordination with other donors finally resulted in building sufficient consensus within Government on objectives and legal/regulatory requirements to allow project preparation to move forward. When opportunities did open up on the Government side, the Task Team was quick to recognize and respond to them. The Bank was clear about best practice elements that should figure in the project design. These included a single agency model, maximum use of existing institutional capacity and data, utilization of a self-financing model for the registration system, and focus on client service and other outputs rather than technological tools or inputs in the basic conceptualization of the Project. The Bank also made the right choice in not attempting to attach this activity as a component to a larger investment intervention, but to go with a stand-alone project that was relatively simple and straightforward to design and implement. This approach was judged as an important contributing factor of success by the Quality Assurance Group (QAG) in its Quality of Supervision Assessment 6 (QSA6) assessment of the Project. 14 The Bank ensured that the appropriate skill mix was included in the Task Team. Technical aspects of the Project were well covered by the Team, which was able to establish a solid rapport with Government counterparts based on the quality of advice and information that was being provided. Start up of the registration system was designed in a phased manner, with priority orientation to the larger urban offices. This was consistent with the PDO, given the level of market activity and value of properties. The Bank was supportive of establishment of a PIU. This was consistent with practice in other Bank projects, as well as projects of other donors in the Kyrgyz Republic. While this created a dual professional track between PIU staff and staff of Gosregister, it is unlikely that the necessary skills would have been attracted to the Project absent a PIU. In retrospect, the risk assessment contained in the PAD appears to have been a bit too cautious. The overall risk rating was "Substantial". The risk of insufficient demand for land and real estate for market activity to pick up was rated as "High". Further, there were concerns about the population's reaction to the new registration system, as well as that of local government and notaries, that turned out to be overstated. It should be added that adherence to the risk mitigation measures listed in the PAD was an important element of overall project success. The PAD was a bit vague on the monitoring and evaluation program. The basic design of regional monitors conducting site visits and being involved in monitoring progress on the systematic registration program as well as the public information programs were agreed by this point, but it was only with practice that the format and details of the monitoring reports were elaborated. The Task Team could have done a better job in identifying key performance indicators for the PDO, as these were not well laid out in the PAD and rather were elaborated as project implementation moved forward. (b) Quality of Supervision Rating: Satisfactory Supervision missions were conducted on average three times a year, which allowed for fairly regular face-to-face interaction on project issues. Supervision reporting was likewise regular and consistent over time in tracking the key output indicators as well as progress on immovable property market development. Next steps and follow up actions were agreed in detail with counterparts, included in Aide Memoires and in reporting to management, and subsequently tracked. The Bank team worked in close cooperation during implementation with the consultant team financed by Sida to provide technical assistance to Gosregister. There were no major unforeseen developments that threatened the implementation path of the Project or its strategy for achieving the PDO. Issues that did come up were identified in a timely manner and with appropriate attention to implications for the overall development objectives. Two important areas of dialogue during the supervision phase were improvement of the financial sustainability model for both Gosregister and the system of local registration offices, and the phased introduction of automated technologies in the operation of the registration system. The lack of major emerging issues, as well as the relatively intensive nature of the ongoing dialogue, meant that a formal Mid-Term Review (MTR) was not held. Rather, issues were addressed on a 15 rolling basis. These measures included, for example, (a) agreement to allow the systematic registration program to continue after the initial target was attained in early 2003; (b) conducting a mid-term social assessment in late 2003 and early 2004, and (c) agreement to expand the systematic registration program to rural areas in the fall of 2004. Fiduciary aspects were well supervised. Procurement issues were promptly and competently attended to, with annual procurement plans used as a basis for tracking developments. Financial management reporting was provided on a timely basis and in accordance with agreed formats. Movement of Bank fiduciary staff to the field after the first few years of implementation of this project allowed for more immediate contact and follow up on identified issues. No safeguards policies were triggered by the Project. A mid-term social assessment was conducted to provide feedback on perceived changes brought by the Project in comparison with the pre-project situation and to identify areas for additional or new work. Toward the end of implementation a beneficiary survey was carried out to again benchmark perceptions of project impacts and to assist in the design of the follow-on project. During implementation, the Task Team was attentive to the issues of inclusion and fairness with respect to lower income groups. The Team also utilized findings on gender related issues that were generated by work financed by Sida, and conducted by the Sida-financed consultants, as well as a study on women and land that was financed by the Bank. Legal covenants were tracked throughout implementation, with the Task Team exhibiting a reasonable amount of flexibility with regard to requirements for a formal mid- term review. The Project's Implementation Performance (IP) and Development Objectives (DO) ratings were Satisfactory during the first four years of implementation. In the fall of 2004, the ratings were increased to Highly Satisfactory, where they remained for the duration of the project life. These ratings were consistent with the actual state of the Project and were well-founded and clearly explained in the project reporting to management on the basis of the key performance indicators. With design of the follow-on project, the Bank has been focusing on further improving the basis for eventual full transition to long-term sustainability of project-related activities. This includes merging the functions of the PIU into Gosregister and further strengthening the financial sustainability of the system. The Project was included in the QSA6 review of quality of supervision. The overall project rating as well as those for all four major components was "Satisfactory" (2 on the 6 point scale). The ECA Region concurred with these findings. One area of difference was the emphasis placed by QAG on tracking potential elite capture of land and the issue of landless poor. These are serious problems in many developing countries, but are largely absent in the Kyrgyz Republic, which after independence has followed a policy of equal allocation of land rights to members of the former large farming enterprises and formal recognition of rights to household plots. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The Bank's performance suffered from only minor shortcomings from identification to close. 5.2 Borrower Performance (a) Government Performance 16 Rating: Satisfactory Once consensus was reached on the PDO, Government ownership and commitment remained consistently strong. A key early step by Government was appointment of a leader for the Project who proved to be central to achieving success. Government backed up this project "champion" when politically sensitive decisions were taken concerning institutional structures and mandates, and later in interaction with local government. A second area where the Government's performance was strong was in establishing the legal and regulatory environment needed for the PDO to be achieved. This included oversight in shepherding the draft Law on Registration through Parliament, as well as legislative reform expanding and strengthening private property rights in land and real estate. This legal foundation was followed up by regulatory and policy changes to further support market development and to establish the new title registration system. Government chose to maintain restrictions on the sale of agricultural land that were relaxed only gradually over the life of the Project. The reason was the potential negative social consequences in an environment where the population was unfamiliar with the operation of land markets and where short-term financial incentives may have led low-income and other vulnerable segments of the population to sell their land. A third area where Government's performance has been strong is in protecting the institutional integrity and mandate of Gosregister in the face of sporadic attempts by other agencies or bodies to take over some or all of its registration functions. Government has also protected the quality of leadership of Gosregister. Though there was a change in the position of Director in 2004 that appeared to be at least in part politically motivated, this situation had been redressed by mid- 2005. Despite this clear commitment, there were problems during implementation with counterpart financing. This was true in the first two years of the Project and resulted in the only "unsatisfactory" sub-rating for the Project, which occurred during 2002. The problem was alleviated when IDA agreed to increase its financing share to 100% for civil works and operating expenditures. (b) Implementing Agency or Agencies Performance Rating: Highly Satisfactory Gosregister played the central role in the success of the Project. It maintained commitment not only to the output targets, but to achievement of the broader developmental objectives. Management of the newly-founded agency ensured that high quality staff were attracted to work on the Project, and it also established lengthy programs of training, testing, and certifying of staff inherited from the BTI's and Land Agency, as well as new hires, prior to rolling out the new registration system. Staff training was part of a longer list of prior measures that had to be fulfilled before a local registration office was certified to begin operations. Gosregister pushed hard to get two model offices up and running ahead of credit negotiations. These served as learning points for the broader roll out. These models were in the two locations that had been included in the prior USAID pilot Project which focused on testing data collection methods for systematic registration. By the time project implementation began, all the building blocks were in place for successful roll out of the system nationwide. 17 The remaining 48 offices were set up in the next two years, with Gosregister and PIU staff directly involved at the local level in verifying office location and renovation, staff training, delivery of necessary equipment and supplies, and public information work. For each office, an opening ceremony was held attended by local government representatives, other stakeholders, and frequently representatives of the media. Public commitment was made to achieving a higher standard of service delivery than had been common in the Kyrgyz Republic in the past. Management of Gosregister was determined to move the systematic registration program as quickly and efficiently as possible. This too was facilitated by a public information campaign, thorough training and testing of staff hired to do this work, careful monitoring of systematic teams in the field, identification and elimination of bottlenecks, and creative approaches, such as downloading large amounts of data from the Communal Housing Authorities and magnifying up available maps where scales were inappropriately small. The network of neighborhood/block representatives that had been established during the Soviet period was utilized as the key outreach mechanism to the population ahead of and during the systematic registration work in a given locale. Public viewing centers, convenient to the population, were opened for a period of 3 months following the initial field surveys to allow the population to verify or contend the survey findings before titles were granted. It was Gosregister's adherence to a well conceived plan combined with creative adjustments which allowed the systematic registration program to accomplish much more than could reasonably have been assumed at the time of appraisal. Gosregister understood the importance of a reliable M&E program, took the actions necessary to put in place such a program, and accepted input from outside as to how the program could be further strengthened. The information coming from the M&E program was used by management to identify key issues for action and to guide adjustments to the project implementation plan. Fiduciary aspects of implementation were well handled by the PIU. The financial management work of the PIU was considered a good case example for the Bank's Kyrgyz lending program. There was some decrease in performance in 2006 with a change in the financial management staff, but this was eventually rectified. A few relatively minor procurement issues arose in the final year of the Project, when the quantity of project procurement was too low to justify a PIU procurement specialist, but overall procurement performance remained satisfactory. An open door policy was maintained with respect to outside stakeholders and other donors and dialogue was active with both. Among donors this included Sida, USAID, the EU, and the Swiss Coordination Office. Relations with donors were not always smooth, particularly over the question of the broad mandate that Gosregister enjoyed over land issues (see Section 3.5(c) above). The relative weakness of civil society organizations (CSOs) in the Kyrgyz Republic, a legacy of the Soviet period, meant that there were less active relations with CSOs than typical in other regions for such projects. However, even these relations grew significantly by the end of the project period. Relations with real estate professionals ­ real estate brokers, notaries, and lending institutions (e.g., Kyrgyz Agricultural Finance Corporation (KAFC) were good. Relations with local government were also good. Gosregister established 6 regional offices to allow for more active interaction with oblast, rayon and municipal government. In Osh, the second largest city in the country, the municipal government used the improved immovable property data from Gosregister and public access to this data to curtail corruption associated with the management of public lands. 18 Gosregister has worked actively on evolution of the business model for the registration system, with the aim of achieving full long-term financial sustainability. The system as a whole has proven its sustainability, but there are some issues remaining with respect to financing activities at the center and provision of services to areas of the country with low levels of market activity and demand. These issues, which in case were never intended to be resolved by the first Project, are being handled under the follow-on SLRERP. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory In view of the minor shortcomings in Government performance, foremost of which were the financing constraints, the overall borrower performance is rated as satisfactory, though performance was clearly on the high end of that range. 6. LESSONS LEARNED The Project confirms a number of recognized lessons with respect to lending. Foremost among these is the importance of Government ownership and commitment over the long term which were evident in identification of a true champion for implementation of the Project and further, stability over time of a qualified and high-performing management team. Continuity of staff was also important on the Bank's side. This approach was deeply appreciated by the borrower and allowed for building and maintaining a relationship of trust that was an important part of the Project's success. The Project benefited from a general approach of pragmatism. Very often development objectives as well as project outputs can be held hostage to pre-conceived notions of how things should be done, or are constrained by vested interests. The LRERP demonstrates what can be accomplished when priority is given to developmental results and everything else is built in concert with that. This was apparent in how the question of institutional arrangements was solved, in the overall commitment to efficiency, and in the willingness to say no to technical interests that could have hamstrung the Project. Of particular importance was the willingness to say no to costly survey and mapping methodologies. While this approach may not be as fully and readily applicable in other institutional, legal and socio-cultural settings, the general principle remains true. The LRERP also serves to confirm findings on the advantages of a single agency model for handling registration and cadastre, and to approach these interventions through stand-alone projects rather than as components in larger projects. The Project reconfirmed the importance of a good M&E program. For a project such as this with multiple points of service provision to the population, this could not have been accomplished, even in a country of relatively small scale as the Kyrgyz Republic, without the use of regional monitors and the insistence that those monitors spend their time in the field. There were also a number of lessons with respect to Bank processes. In addition to staff continuity noted above, the Project benefited from regular supervision missions. By 19 piggybacking travel with other missions, the LRERP managed to have an average of three supervision missions per year within the existing supervision budget constraints. Another lesson was the correct approach of the Task Team to be patient during preparation to allow for a sound foundation to be established, rather than to succumb to pressures to speed up project processing. It may be debatable as to whether or not the Project was `over-supervised' by the Bank. The QSA6 review made an observation in this regard. The appropriate level of Bank involvement primarily depends on what the borrower needs to be successful, which varies from project to project and country to country. During the life of the LRERP, the major share of local registration offices was visited by Bank missions, some multiple times. This helped turn up issues that could then be dealt with more broadly and was a necessary check on the maintenance of service standards. While this level of mission presence is not possible in projects of much larger scale, alternative and lower cost approaches ­ particularly the hiring of local consultants with clear Terms of Reference (TORs) to assist in field work­ are possible and should be pursued. The benefits of the Project were and are wider than the direct benefits of achieving the PDO. The well recognized success of this intervention had a positive impact on the broader Bank- Borrower relationship and on the reputation of the Bank in the Kyrgyz Republic. Further, it is useful as a model of success for land registration and land administration projects more broadly. 7. COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS (a) Borrower/implementing agencies Ministry of Finance (A. Kozhoshev, Deputy Minister) Hereby, the Ministry of Finance of the Kyrgyz Republic having examined the report on project completion "Registration of land and real estate" IDA (33700) would like to inform you on the following: The Ministry of Finance of the Kyrgyz Republic likewise believes that this project has achieved the desired goals and was quite efficient. Taken as a whole, the Ministry of Finance of the Kyrgyz Republic agrees with the provided Report on project completion; however, in part 2.2 it is stated that the lack of required counterpart funds on the part of the government of the Kyrgyz Republic throughout the duration the first half of the project and the limitations of IDA credit funds amount have exerted the retarded influence on the project realization rate. In connection with this it is necessary to point out that right up to year 2005 the project has not utilized the amounts of external financing that had been previously approved in the budget. The implementation of the provided funding in percentage ratio to the initially approved amounts comprised 90 per cent and less. The data is provided in the table below: Year The amount approved for a year, US dollars Actually utilized amount within a year, US dollars 2001 1, 800 1, 082 2002 1, 800 1, 650 2003 1, 750 1, 100 2004 2, 000 1, 180 2005 1, 500 1, 386 20 In connection with the information stated above, we believe that the arguments supporting the statement that the government of the Kyrgyz Republic did not provide funding on its part to the desired degree are groundless and we turn to you with the request to eliminate that part from the report on project completion. In addition, in section 7 "Comments on the issues raised by Borrowers/Executive Agencies/Partners"1 in Table (b) "Financing" the actual estimate of governmental co-financing of the project comprised 1.12 mln. US dollars. However, in the Annex 7 in the part "Co-financing and utilization of cash assets" it is stated that "the co-financing on the part of the government of the Kyrgyz Republic amounted to 0.52 mln. US dollars, including 1.6 mln. US dollars." You are kindly requested to take into consideration the indicated discrepancy in the final version of the Report on project completion.2 Gosregister (A. Joldoshov, Director) We've reviewed the draft final report prepared by both the World Bank and our Agency. We believe that the information provided in the ICR in sufficient manner states the objectives of development, the project structure and key factors affecting the project implementation and outputs. Due to the above mentioned fact the State Agency for Real Estate Registration under the Government of the Kyrgyz Republic does not have any comments or suggestions with regard to the draft final report on project completion and outputs. (b) Cofinanciers Swedish International Development Agency (Sara Holsbrink) On page 6-7 in the report Sida's involvement in the project is mentioned. We would just like to make a short comment and underline that for the second Sida funded program (2006-2009) Sida changed the design of the project to some extent. The first Sida-funded program mainly included technical assistance to the WB project through Swedesurvey AB . During the second program the technical assistance to the implementation of the WB credit continued but the program also had the purpose of deepening the institutional cooperation between Gosregister and the Swedish National Land Survey, Lantmäteriet. So the objective for the second program was broader and also focused on support to the development of the entire land administration sector and not only land and real estate registration. 1 Instead of section 7 this was actually intended to be a reference to Annex 1 "Project Costs and Financing". 2 Subsequent to the receipt of this letter, the relevant sections of the main text section 2.2 and Annex 7 have been revised. 21 Swedish National Land Survey, (Tommy Kalms, Project Manager) There are a number of factors that have contributed to the successful results of the project and some basics for success worth mentioning from the Sida project are: · Client ownership · Step by step approach in development · Financial and technical sustainability · Real property registration as part of the economic infrastructure · Real property registration is a public service · Close collaboration with the World Bank 22 ANNEX 1. PROJECT COSTS AND FINANCING (a) Project Cost by Component (in USD Million equivalent) Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate (USD Appraisal millions) millions) INSTITUTIONAL 5.11 3.88 0.76 DEVELOPMENT OPERATIONAL SERVICES 4.09 6.88 1.68 TRAINING 0.22 0.19 0.86 Total Baseline Cost 9.42 10.95 1.07 Physical Contingencies 0.94 0.00 0.00 Price Contingencies 0.70 0.00 0.00 Total Project Costs 11.05 10.95 0.93 Refinancing of PPF 0.77 0.19 0.25 Total Financing Required 11.83 11.14 0.94 (b) Financing Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate Cofinancing Appraisal (USD millions)(USD millions) International Development Association 9.42 10.02 1.06 (IDA) Government 2.42 1.12 0.46 23 Annex 2. Outputs by Component Component 1: Sporadic Registration in the Kyrgyz Republic by Years Year Total Number of Number of Value of Number of Number of Number of Secondary Mortgages Mortgages in Registered Registered Sporadic Trans- US$ Sales Leases Registra- actions tions 2002 101,219 46,888 22,387 84,786,598 25,901 3,184 2003 116,304 67,492 15,953 123,398,555 17,763 2,953 2004 137,484 62,342 34,902 246,219,397 37,989 5,718 2005 137,762 66,416 40,434 418,847,950 34,992 5,164 2006 151,936 102,223 43,001 723,679,015 39,957 5,030 2007 163,752 110,758 45314 1,098,924,357 48,140 4,666 2008 180,506 83,501 48,430 1,346,683,638 43,716 4,859 Total 988,872 435,748 250,421 4,042,539,509 248,458 31,574 Component 2: Cumulative Number of Properties Covered by the Systematic Registration Programs in the Kyrgyz Republic by Years Year Properties Properties Total Properties Properties Total Investigated in Investigated Properties Registered in Registered Properties the Urban in the Rural Investigated the Urban in the Rural Registered Systematic Systematic in the Systematic Systematic in the Registration Registration Systematic Registration Registration Systematic Program Program Registration Program Program Registration Program Program 2000 3,700 3,700 3,250 3250 2001 131,860 131,860 130,860 130,860 2002 690,893 690,893 567,850 567,850 2003 1,000,866 1,000,866 858,640 858,640 2004 1,310,186 108,203 1,418,389 1,117,286 105,643 1,222,929 2005 1,382,111 371,768 1,753,879 1,254,682 339,225 1,593,907 2006 " 872,179 2,254,290 " 807,345 2,062,027 2007 " 1,324,128 2,706,239 " 1,251,085 2,505,767 2008 " " " " " " 24 Annex 3. Economic and Financial Analysis3A. ECONOMIC ANALYSIS Economic Analysis from LRERP PAD 1. The project economic analysis found in the Kyrgyz Republic LRERP PAD was largely guided by the Bank's "Economic Analysis of Rural Land Administration Projects". The main benefits identified consisted of: · Increased tenure security, · Increased access to credit, · Revamped land and real estate markets, and · Improved information base for land administration. Analysis of Actual Economic Impact 2. The manner in which the economic benefits would be manifest ­ as per the project design, as well as the current status of achievement for each of these benefits - is summarized in the following table. Table 1: Summary Analysis of LRER Project Economic Performance Principal Project How Would the Benefits Overall Objective Indicators that Can Benefit be Manifest Assessment Measure Progress Identified at the at Project Outset End Increased security By enhancing investments in Strong evidence of a vibrant urban land of tenure land and real estate market with significant sale transactions HS confirming that security of tenure has been instrumental in this development and other hard to quantify benefits for the rural sector4. Increased access to By removing constraints to, Strong evidence and reported amounts in credit and reducing the costs of both mortgage based home equity loan long-term and working HS transactions and residential mortgage in capital. both urban and rural areas, confirming increased access to credit. Revamped land and By increasing the number of Impressive land market estimated at about real estate markets transactions for sales and HS US$ 800 M to US$ 1 B, with a growing long-term leases for both land support service industry: realtors, assessors and real estate. and associated umbrella NGOs. Improved Improved information base for S Improved information base is being information base the fiscal and land developed (please see paragraph 27 below). for land administration cadastres. Fiscal cadastre has not yet been started. administration 3This analysis was completed in early 2008 so it does not take into account data from 2008. 4 The important message here is that the urban market is not the only objective indicator of increased security of tenure. Other aspects of project progress, as is the case with agriculture sector, may involve situations where benefits are more problematic to measure. This does not mean that such benefits are unimportant. 25 (HS = highly satisfactory rating, S = satisfactory rating) 3. Regarding the benefits of the improved information base, there are a wide range of indicators that can be mentioned. For instance, data on the quantities of information requests to Gosregister is an important indicator, which would receive greater attention during the implementation of the follow-on project. Additionally, there is plenty of anecdotal evidence from the Urban Institute about the availability of information in Osh, which has been contributing to improved land allocation decision making on public lands, and hence improving the transparency of the allocation process. Very much like tenure security, some of the non- quantifiable benefits may be very significant in this connection. 4. The Project Appraisal Document (PAD) was less optimistic about the Project's potential contributions and impact on the financial sector. The PAD stated, "due to the underdeveloped financial sector in the Kyrgyz Republic, there is not expected to be a large impact through strengthened bases for collateral, though the Project will support the development of a stronger financial sector being promoted by the Rural Finance Projects and other IDA interventions". This has proved to be a gross understatement. The Project's actual and potential impact on the financial markets has been substantial, mainly by facilitating mortgage transactions and making institutional credit available to large number of people. (See Annex 2 Table on Sporadic Registration and Table 2 below. Table 2: Market Size Using Mortgage Related Information - by Years Year Mortgage Loans as Average Value Extrapolated Number of Estimated a Percent of Real of Mortgage Average Registered Sales Market Size Property Value Loans US$ Property Value US$ M US$ 2002 80% 3,787 4,734 25,901 123 2003 80% 7,735 9,669 17,763 172 2004 80% 7,055 8,818 37,989 335 2005 80% 10,359 12,949 34,992 453 2006 80% 16,829 21,037 39,957 841 2007 80% 24,251 30,314 48,140 1,459 TOTAL 80% 13,346 N/A 204,742 N/A 5. The cumulative value of mortgages from 2002 to 2007 reached US$ 2.7 billion, of which roughly 3.22 %, or some US$ 87 million are estimated to be outstanding (but not cumulative) residential mortgages5. The rest are regular loans backed by property mortgages. Residential mortgages correspond to 2.56% of the GDP, which was estimated at about US$ 3.4 billion in 2007 using the current exchange rate. Development of the mortgage market has been noteworthy. In the developed world, the ratio of the total value of current mortgages to Gross National Product (GNP) may run as high as 60%. The implied mortgage market risks are limited since the beneficiaries have proven repayment capacity. The only risk would be that a possible but unlikely boom in the construction market may sharply bring down the property prices and 5 This estimate is based upon Central Bank data supplied in February 2008 during an interview. As of the end of December 2007, long term mortgages committed in both local and foreign currency amounted to KGS 3.3 billion, corresponding to about US$ 86.84 million using the current exchange rate of US$ = KGS 38. The data represents the outstanding mortgages. Up until recently, there were very few mortgage operations in the Kyrgyz Republic. 26 those properties that may have been foreclosed may constitute a risk for the Banking sector. This last statement is based more on speculation than actual market performance in any neighboring country. 6. Using the above limited data, the estimated size of the real estate market (that means value of properties changing hands as a result of sale transactions) is about US$ 1.46 billion, which is slightly less than half of the GDP and far in excess of the Government Budget. Average property prices have increased by more than six fold from 2002 to 2007. This may be good news for the sellers and potential investors, but raises some concern regarding the access of the poor to affordable housing as well as financial markets and services. The dramatic increase in property prices is mainly due to the limited supply and excess liquidity on the international markets. The construction industry in the Kyrgyz Republic is practically dormant, producing only a few thousand new marketable properties per year. Meanwhile, these high prices should send strong signals to a construction boom in the next few years. 7. Prior to approval of the mortgage law in January 2005, there was very limited residential mortgage activity in the Kyrgyz Republic. Before adoption of the Mortgage Law of 2005, the Kyrgyz Republic already had a similar but less advanced legal framework for mortgages. This was the Mortgage Law of 1999 (Law No: 41 of May 29, 1999) which was amended in 2001 (Law 61, June 28, 2001)6. The new law of January 2005 has a modern approach, incorporating internationally recognized best practices for the liquidation of collateral through non-judicial foreclosure proceedings. 8. Total Value of Mortgages: The PIU consolidates all mortgage data when it is reporting about project progress. Some of these mortgages are residential mortgages while the rest are regular loans backed by immovable property collateral. Both types of mortgages are registered by Gosregister. It also adds up the cumulative number and value of mortgages registered within the given calendar year. Hence the numbers in Table 2 above do not reflect the total value of 'active'mortgages registered in the Gosregister or the total volume of active mortgage loans in the country. Cumulatively adding up annual registered mortgages/equity both within the year and over several years involves some double counting,because a given piece of property can be used as collateral for shorter-term credit over and over again. The PIU has some information to disaggregate genuine mortgages (that is residential mortgage) from commercial loans backed by mortgage, and it has agreed to adopt this practice in the future. 9. Mortgages for financing of agricultural inputs are made for shorter-term loans (up to 3 years). According to the Central Bank data, the amount of outstanding agricultural loans issued in KGS for more than one year is about KGS 1.58 billion, or about US$ 41 million, suggesting that there are many small loans backed by mortgage and mortgage loans are that are closed are re-initiated using the same collateral. 6Article 1 of this Law (of 2001) defines the concept of mortgage as (a) a method of securing performance of a monetary obligation or an obligation expressed in the monetary form against pledge of the ownership right or other real right to the immovable property, and (b) under a mortgage agreement, one party (the mortgagee) being an obligee under mortgage obligation (the principal obligation) shall have the priority right to satisfy his monetary claims to an obligor under this obligation from the value of the mortgaged immovable property or property rights (the subject of mortgage) of the other party (the mortgagor) over any other obligee of the mortgagor, except as provided by this Law. 27 10. New Construction: The Statistics Committee reports that some 2641 properties were constructed during the first half of 2006 producing a total floor space of 314,300 m2. Some 2,302 of these properties were individual houses and remaining 339 were apartments. The houses built outside of the large metropolitan areas are usually for the residential needs of the owners and do not constitute marketable properties. Generalizing to an entire year, we notice that an economy of 5 million people and US$ 3.4 billion GNP produces less than 1000 new apartments in a year. This is a very low figure given the needs. The Statistical Committee estimates that the market needs at least three times as many units as is being produced. The needs are hence estimated to be at least three times larger, or some 1.5 million square meters. The table below captures the essential details. Table 3: New Construction during the First half of 2006 Description Number of Floor Space (m2) Average Size in Properties m2/unit Houses 2,302 258,000 112 Apartments 339 56,300 166 TOTALS 2,641 314,300 Source: National Statistics Committee - Interview 11. An interesting observation is that the average size of the new apartments is excessively large for the public. Some of these apartments are in new tall buildings in Bishkek. In order to remedy the existing housing crunch in Bishkek, new mass housing projects are needed. This could be a public project or a private undertaking. As of mid 2007, the Government has already started financing affordable housing projects for its civil servants where owners purchase the properties by long-term mortgage. 12. New apartments in metropolitan areas cost about US$ 400 to 600 per square meter for unfinished apartments. This cost is inclusive of the bare walls and very basic features of the construction. The new owner must put in the finish and amenities as per individual tastes. Finishing an apartment adds at least another 50% to the cost of the construction. The PIU estimates that new apartments in prime location may run from US$ 800/m2 to US$1200/m2. As such, the cost of most new apartments lies outside the range of the residential mortgage market, which has a cap of US$ 100,000. Meanwhile, it costs about KGS 1800 (US$ 45) per square meter to construct houses with basic features in remote areas. In Bishkek, it costs about US$ 250 per square meter to build a house. Interestingly, houses cost less to construct than apartments and this seems to run counter to conventional wisdom of the modern economies. 13. Transaction Costs: The PAD specified that the Project would facilitate the process of sales and lease transactions in immovable property by simplifying previous steps and procedures, and by providing legal guarantee from the State. This goal largely been achieved. The cost of land-related transactions in the Kyrgyz Republic has been brought down to a negligible level. Currently, land related transaction costs are estimated at less than 2 percent of property value for large and expensive estate and less than 1 percent for houses and apartments. Transaction costs for an average property are illustrated in the below table. This study was prepared in conjunction with the requirements of Doing Business in the Kyrgyz Republic, sponsored by the World Bank. Table 4: Transaction Costs for a Sample Case 28 Description Amount in Amount in Comments KGS US$ BACKGROUND INFORMATION FOR SAMPLE CASE Price of Property: US$ 30,000 Floor Area: Larger than 40 m2 but under 100 m2 Geographical Location: Bishkek ­ where fees are higher Type of Tenure: Private ownership Nature of Transaction: Regular person to person Sale Date of Transaction: July 2007 Notary Fees: 500 13.16 Assembling and Verification of Documents and Preparation of Purchase Agreement State Duty 7000 184.21 Collected by the Notaries and transferred to the Government. The Notaries retain 10% of the tax proceeds for service charge Registration Fees at 1000 26.31 Assuming urgent registration GOSRGISTER TOTAL Transaction 8500 233.68 Following the completion of paper work at the Cost notary, the property must be registered within 30 days at the GOSREGISTER. Cost of Transaction as 0.78% According to the World Bank Doing Business a percent of Property Report, the cost of registering property in Value Kyrgyzstan is 1.9% of property value, against regional average of 2.7% and 4.3% in the OECD countries (www.doingbusiness.org ) Source: Mission Estimates 14. Agriculture Sector Improvements: Agriculture sector improvements have been less noticeable except for an increase in the supply of agricultural credit. The underlying reasons are (a) certain restrictions (as of early 20087) still applied on the transactions of agricultural land, and (b) the Project's initial focus has largely been on the development of urban land markets. The PAD explicitly stated that "because of the higher value of land and real estate in urban areas, and the higher level of transactions anticipated there in the short-to-medium term, systematic registration under the Project will be undertaken first in urban areas of the country". 15. An important aspect of the rural and agricultural benefits is that it is not feasible to quantify many of these impacts at this time. Project impact related to the land market in the rural and agricultural domain has been limited. However, there may well be long-term hard-to- measure impacts related to improved tenure security and associated investments (including those which are self-financed) and/or improved land use for which rigorous attribution would be quite problematic. This situation of problematic measurement in fact is very common in many countries. 16. Continuing further on this caveat, therefore, just like in other countries, measurement and attribution of the "assumed" benefits in qualitative terms are problematic, especially in the short- and medium-term. This situation is reminiscent of many phenomena in natural resource management, which often has many important benefits that are difficult to measure. However, 7Most of these restrictions were lifted in early 2009. 29 that does not mean one should dismiss or ignore the benefits that cannot be readily quantified or otherwise measured. 17. Initial Targets and Achievements: Both the available data and investigations in the country reveal that the Project has had a visible impact in the urban sector whereby physical targets have been exceeded by comfortable margins. The below table provides information on the overall project performance with respect to its physical targets. Table 5: Physical Targets Set at the Start and Actual Achievements Type of Registration Planned Achieved Comment Systematic 600,000 2,505,767 Target exceeded by Registrations more than four-fold Sporadic 200,000 988,872 Target exceeded by Registrations more than four-fold Note: Achievements were updated to reflect the status as of the end of 2008. B. ANALYSIS OF FISCAL IMPACT Fiscal Impact Analysis from Project Appraisal Document 18. Transaction Tax: At the time of project design, the Government administered a transaction tax. This tax was set at seven percent of the property value and it was collected by notaries. The PAD made reference to a possible Government strategy for the introduction of land and real estate taxes together with a phased removal of the transactions tax. 19. Financial Sustainability of Registration Offices: The PAD stated that "the registration offices as a whole will be self-financing net of taxes payable by these offices. However, with the conservative assumptions laid out above, the taxes and net revenues of these offices will not be sufficient to cover all Project costs". A good part of the Project funds (IDA funds) would finance the initial registration on a systematic basis without fees being charged property owners. This approach would be critical for the smooth functioning of the systematic process and for the public's acceptance of the new system. 20. Property Tax: The PAD predicted that as a result of undertaking systematic registration in the Kyrgyz Republic, the investment costs of the Project would be more than offset by an important increase in fiscal revenues, namely by augmenting collections from a tax on immovable property (or simply stated the property tax). This achievement would be due to the information generated by the land registration system. 21. In order to analyze the impact of the Project on tax on immovable property (property tax), the following assumptions were made. · 300,000 properties would be covered by systematic registration and data filed at the registration offices; · the average value of each property would be estimated at USD 5,000; and · the tax rate applied to immovable property would be 0.3 percent. 30 22. Following these assumptions, the following conclusions were drawn: · average annual tax per property would amount to US$ 15 per year, and the total revenue generated each year would be US$ 4.5 million; · this would compare favorably with the total cost for implementation of the systematic registration program of roughly US$ 4 million and the amount of the IDA Credit of US$ 9.43 million. Analysis of Actual Project Fiscal Impact Compared to PAD Targets 23. Status of Transaction Tax: There has been a significant reduction in the transaction tax rate. First it was reduced from 7% to 5%, and then, through introduction of the fixed fee schedule, to something in the range of one to two percent. This is what many land registration projects try to accomplish but often fail to do. The relationship between the percentage rate reduction and aggregate value of total revenues generated is also interesting and worth exploring. Lower revenue is often cited as an argument for not lowering rates, in the case in the Kyrgyz Republic, the increased volume of transactions appears to have more than compensated for the lower rates per transaction. Meanwhile, the transaction tax acquired a new name: "State Duty". The State Duty is being collected in conjunction with various types of transactions involving changes in ownership for vehicles, motorcycles as well as real estate. State duty is a local tax and supports local administrations. The State Duty rates are shown in the following table for transactions involving real estate. On average, it costs a real person about KGS 7500 in transaction tax (State Duty) when buying a piece of property. Table 6: Property Transaction Tax Collected by Notaries (also referred as State Duty) Standard Transaction Fees Charged by Notaries in Bishkek, Osh, Cholpan-Ata, Jalal-Abad Residential Fees ­ KGS Property Floor Space Real Persons Legal Entities Up to equal to 40m2 3,000 5,000 Between 41 m2 and 100 m2 7,000 15,000 Larger than 101m2 15,000 25,000 Other Property Fees ­ KGS Type of Property Real Persons Legal Entities Land 10,000 20,000 Other locations ­ urban 1,000 5,000 Other Locations ­ Rural 500 3,000 90% of fee income goes to Treasury 10% of fee income kept by notaries Notary service charge = approx. KGS 500 Standard Transaction Fees Charged by Notaries in Bishkek, Osh, Cholpan-Ata, Jalal-Abad Non Dwellings Fees ­ KGS 31 Property Floor Space Real Persons Legal Entities Up to 50 m2 3,000 5,000 Between 51 m2 and 100 m2 5,000 10,000 Between 101m2 and 200 m2 10,000 15,000 Between 201 m2 and 400 m2 15,000 20,000 Larger than 200m2 40,000 40,000 Source: Law on State Duty for Certification of Transactions. The transaction fee is discriminated by: (a) Urban versus Rural (see table) , (b) Proximity of family relationship (not captured in the table), and (c) Physical persons versus legal persons (see table). 24. Recovery of Sporadic Registration Costs: The project documents predicted that further fiscal benefits would be generated by charging users for the cost of sporadic registrations (as opposed to systematic registrations, which would be free of charge). This has largely been achieved and most Land registry offices (LROs) have become financially self-sustaining. In offices where systematic registration services have been completed, such as Osh and Bishkek, fees from sporadic registrations provide a good source of LRO income. 25. Sporadic Registrations: The Project has been able to perform some 808,000 sporadic registrations. This is more than four times the target initially set. The owners usually need to have a strong motive to compel them to seek sporadic registration that comes at a cost, versus systematic registration where the service is free. The property owner asks for sporadic registration when he/she needs to: (a) sell property, (b) get mortgage credit, (c) give away gifts and bequeath inheritance, or (d) access to other social or public utility servicesassociated with proof of address or property ownership. The costs vary from KGS 300 to about KGS 1,800 per property, with a possible average in the neighborhood of some KGS 500 (or about US$ 12.5). Therefore, the estimated total fee collections by the LROs should be roughly in the order of some US$ 15.5 million over the years from 2002 to end of 2007. Table 7: Sporadic Registration Costs Description Lower Bound Upper Bound House KGS 650 KGS 1,800 Apartment KGS 400 KGS 500 Shop KGS 300 KGS 500 26. Registration Fees: The fees administered by the LROs have evolved from 2002 to present. The registration fees originally were KGS100 for the standard sporadic registration. This held until early 2005. Thereafter, through 2008, the fee was KGS 600 for a regular request for sporadic registration, and twice that amount for a rush job. There are also set information fees for copies of documents. 27. Technical Inventory Fees. Up to 2005, the LROs were generating substantially more revenue (generally twice as much) from conducting 'technical inventories'of buildings as compared to registration fees. However, due to the increase in registration and information fees and transactions, as of 2007, Gosregister's fees from registration and information exceeded technical inventory income by 44%. For any building or apartment being registered, technical inventory or building survey has been required if the property had not been registered within the previous six months. Although strictly speaking technical inventory is not part of registration, it 32 is frequently perceived as being closely associated, due to the fact that it is administered by LROs and is required legally as a prerequisite for many forms of registration. It is expected that the Kyrgyz Republic will eventually follow the experience of other countries which have transitioned to a market economy, where technical inventory requirements will gradually be phased out once immovable property registration fees become sufficient to more fully cover registry operations. Such reforms are also consistent with improvements in "doing business" indicators.. 28. Status of Property Tax: Property tax has always been intended as a local tax, and hence would affect the financial capability of municipal government. A basic enabling law was approved in 2005, but the implementing regulations, which also require Parliamentary approval were then pending through most of the project period. The valuation methodology was reviewed in detail during 2004-05, and Gosregister submitted its proposal for an amendment with proposed implementing regulations in the summer of 20058. Initially, the hold up was on the legal side. Later, there was a delay due to internal disagreements on the methodology and accessibility of valuation data, which remained unresolved. As of early 2008, the 2005 property tax was still not operational. According to the proposed regulations the tax would first be implemented in Bishkek and Osh on a pilot basis. Property valuation would depend upon zoning, location, market reference prices as well as the base construction material used to build the property. The rates would be 0.5% of assessed property value for dwellings and 1% for non- dwellings (commercial estate). The property tax would supersede the road tax and emergency situations tax collected by the LROs. The tax was beset by some controversy. Although not decided, it was envisaged that the local governments would likely make the collections for the property tax once it is instituted. There were many exclusions to the tax, such as public property and infrastructure. The untaxed minimum would cover the elderly and low income people as well as 1 or 2 bed room apartments, which are considered to be more of social shelters. In short, it was the rich and well to do that the tax targets. The pilot applications in Bishkek and Osh would target some 345,000 properties, but tax would be collected only from a fraction of these properties due to planned exclusions (public properties) and exemptions (low-income families with smaller dwellings). According to Gosregister's analysis, at full development, the anticipated collection would be around KGS 183 million (or some US$ 4.81 million) which would be more than what was initially predicted for the whole country, but accruing from two cities only. Broader Fiscal Impacts of LRERP 29. Transaction Tax: The transaction tax is also called the State Duty on Transactions. It is collected by notaries who keep 10% of the tax proceeds in return for the collection service. The transaction tax is a local tax and it is co-mingled with all types of transaction taxes such as taxes levied on both movable and immovable assets: selling of a car or a motorcycle as well as sale of real estate property. As discussed above, the applicable rates have changed several times. Prior to adopting the current flat rate, local governments have lamented that the collections were higher in the past. This was so despite the fact that people were routinely underestimating the 8 The enabling law and draft regulations were set aside in September 2008 when a different form of property tax was introduced as part of the new Tax Code in September 2008. However, a moratorium on the implementation of the property parts of the 2008 Tax Code was subsequently declared in February 2009. Hence the proposal for the regulations under the earlier property tax may still be considered in the future. 33 values of their property. Meanwhile, the Ministry of Finance argues that on the contrary, the collections have actually improved. Collections of state duty over the last three years have improved from KGS 215 million in 2005 to about KGS 400 million in 2007. The summary data are as follows: Table 8: Tax Revenue from Transaction Tax (Million KG Soms) Years Overall Revenue Related to Real Estate Revenue Transactions (50% of total) from State Duty 2005 215 108 2006 366 183 2007 (estimate) 400 200 Source: Ministry of Finance 30. Evolution of the Transaction Tax (State Duty): At project design, the transaction tax rate was set at 7% of property value. At a later stage, it was reduced down to 5%. Afterwards, the Government adopted a flat rate of KGS 1,000 per transaction. However, this did not survive as was the case with the other arrangements. Finally, a differential rate structure was adopted in October 2006 via Law No 733 and administration of the tax was brought under the State Duty for Transactions (both movable and immovable). Currently, the property transaction tax is being collected as a state duty following the provisions of the above stated Law. 31. Analysis of Overall Fiscal Impact for LRERP: Below is an attempt to estimate the fiscal impact of LRERP over 2001-2006. The fiscal returns consist of revenues generated by the LROs, revenue generated through the State Duty on Transactions and avoided costs, which consist of costs of operations of the LROs and self-financing for the Gosregister System. Total fiscal revenues (direct and indirect) have almost tripled from 2001 to 2006. Meanwhile, dependence of the system on public resources has been declining. In 2006, the Gosregister system's fiscal impact was positive KGS 215 million with the State Duty, and negative KGS 14 million without the State Duty. The fiscal impact without the State Duty has been steadily declining whilst the service levels have been increasing. 34 Table 9: Kyrgyz Republic LRERP Fiscal Impact Units 2001 2002 2003 2004 2005 2006 T ax Revenue Generated for the Government Revenue GeneratedDirectly by the LRO S ystem VAT T housandSom 5,813 7,420 10,148 12,847 17,122 18,517 Local T ax T housandSom 807 1,434 1,807 2,337 3,239 4,186 Corporate Income T ax T housandSom 226 307 639 659 925 1,273 RoadT ax T housandSom 257 340 421 587 775 650 T otal T housandSom 7,102 9,499 13,015 16,430 22,061 24,626 Revenue GeneratedIndirectly through State Duty on T ransactions andCollectedby Notaries Number of Sale T ransactions Number 25,900 17,763 37,898 34,992 39,957 Average State Duty per T ransaction KGS /transaction 5,750 5,750 5,750 5,750 5,750 Revenue Collected T housandSoms 100,000 148,925 102,137 217,914 201,204 229,753 T otal T ax Revenue Directly CollectedandCausedto be Collected 107,102 158,424 115,153 234,344 223,265 254,379 Potential Government Spending (from T ax Revenue) Avoided Costs of Operations of LROs T housandSoms 18,840 23,930 27,283 34,368 47,000 61,486 Self Financingfor GOSREGIS T ER System T housandSoms 8,319 11,036 13,746 17,353 12,554 12,619 T otal Government SpendingAvoided T housandSoms 27,159 34,966 41,029 51,721 59,553 74,105 T otal T ax Earned and Government Spending Avoided T housandSoms 134,261 193,390 156,182 286,065 282,818 328,484 T ax Revenue Consumed by T he System State Contribution to GOS REGIST ER S ystem T housandSoms 49,969 37,264 34,801 36,500 36,610 38,775 State Contribution to LRO S ystem T housandSoms 0 0 0 0 0 0 T otal Government Spending Using Other T ax Revenue T housandSoms 49,969 37,264 34,801 36,500 36,610 38,775 Overall Fiscal Impact on Government Revenues T housandSoms 57,133 121,160 80,352 197,844 186,655 215,605 Fiscal Impact without State Duty on T ransactions T housandSoms (42,867) (27,765) (21,786) (20,070) (14,549) (14,148) Methodology andestimates developedby Mission. 35 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Lending Gavin P. Adlington Lead Administration Specialist Consultant Edward C. Cook Sr Land Administration Specialist ECSSD Joseph Goldberg Sector Manager ECSSD Anthony John Lamb Legal Consultant Consultant Hannah Koilpillai Disbursement Officer LOAG Kaganasabai Loganathan Financial Management Specialist LOAG Jose Martinez Procurement Specialist ECSSD Maurizio Ragazzi Legal Counsel LEGEM Nikolai Soubbotin Legal Counsel LEGEM Stan Peabody Social Development Specialist ECSSD Asyl Undeland Operations Officer ECSSD Alma Zhandauletova Financial Management Officer LOAG Robert Buckley Peer Reviewer Lynn Holstein Peer Reviewer ECSSD Valeri Tian Operations Officer Mohammed Nawaz Legal Counsel LEGEM Supervision/ICR Gavin P. Adlington Lead Land Administration Specialist ECSSD Galina Alagardova Financial Management Specialist ECSPS Edward C. Cook Sr Land Administration Specialist SASDA Talaibek Torokulovich Operations Officer ECSSD Koshmatov Ainura Kupueva Operations Officer ECSSD Nurbek Kurmanaliev Procurement Specialist ECSPS Anthony John Lamb Legal Consultant ECSSD Jessica Mott Sr Natural Resources Economist ECSSD John Otieno Ogallo Sr Financial Management Specialist ECSPS Janna Ryssakova Social Development Specialist ECSSD Rumyana Tonchovska IT Consultant ECSSD 36 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY97 FY98 FY99 FY00 FY019 N/A 587.90 FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 FY08 0.00 Total: N/A 587.90 Supervision/ICR FY97 N/A 0.00 FY98 N/A 0.00 FY99 N/A 0.00 FY00 N/A 3.10 FY01 19 99.88 FY02 20 77.30 FY03 12 76.65 FY04 25 96.31 FY05 17 63.33 FY06 17 76.67 FY07 39 116.57 FY08 31 92.89 FY09 12 45.40 Total: 192 748.10 Note: Staff weeks data prior to 2001 not available. USD Lending costs in FY00 includes LEN costs from earlier years. 9 Data on annual basis not available prior to 2002. 37 ANNEX 5. BENEFICIARY SURVEY RESULTS The World Bank sponsored a consulting assignment to build capacity within the State Agency for Registration of Rights to Immovable Property (Gosregister) and to measure performance in terms of stakeholder feedback. The assignment consisted of initial capacity building for Gosregister monitoring specialists and then `learning-by-doing' through conducting field work involving a survey. Capacity Building consisted of two formal seminars for monitoring specialists and one month of mentored field work to identify stakeholder assessments of Gosregister performance. This work yielded a set of survey instruments, reference material in the form of handouts and a manual for conducting field work, and the emergence of 11 monitoring specialists with greatly enhanced performance monitoring capability. With this increased capacity, it is recommended to broaden the terms of reference for these monitors from the current practice of compiling numbers on outputs to conducting more qualitative assessments, and institutionalizing their inputs into determining overall Gosregister policies and procedures. The primary component of performance monitoring was conducting a survey. Following stakeholder meetings, four target groups were identified: regular clients (defined as those who had used registration services in 2006), non-clients (who had no interaction with Gosregister besides being covered by the systematic registration), professional organizations that work regularly with Gosregister (including realtors, notaries, local governments), and Gosregister staff. The following typology of areas for measurement was developed: (i) Service Provision Indicators (SPIs), which concern institutional performance, including levels of use or non-use of Gosregister's services, information dissemination, levels of access, and assessments of complexity and cost of using Gosregister services; (ii) Staff Professional Competence Indicators (PCIs), which concern subjective performance on substantive tasks, including accuracy of registration of data and speed of services; and (iii) Client Relations Indicators (CRIs), which concern subjective performance on interacting with clients, including issues of friendliness, convenience, fairness of service, and corruption. The survey was conducted over a two week period in May-June 2007. It encompassed the 43 most active local registration offices (out of 50). Samples were: 9 549 were clients (50% of the sample), 9 198 (18%)were non-clients; 9 135 (12%) were representatives of various professional organizations providing services connected to the activities of Gosregister; 9 223 staff of Gosregister (20%). In addition to the survey, Rural Development Fund (RDF) and Gosregister monitoring specialists conducted focus group discussions, structured interviews, and observations of several local registration offices' (LROs') operations. 38 Key findings from the field work are: General Evaluation 1. Gosregister's services are generally evaluated as average, but its overall role is rated as valuable. 45% of clients gave Gosregister a `3' on a scale of 1 to 5, with most of the remainder either a `2' or a `4'. An `average' rating is probably to be expected in that Gosregister should provide routine processing services.10 2. The value of Gosregister's mission to facilitate the property markets is largely recognized. There are high rates of understanding and use of Gosregister to secure ownership rights and utilize its services for credit. 3. Human resources are seen to be by far the most important factor influencing quality of services. Nearly 2/3 of the responses noted issues related to staff operations (especially competence and ethics) as most important. Recommendations for improvements also focus on staff training, motivation (wage levels), and the need for greater accountability for mistakes in performance. Service Provision Indicators 1. Negligible use of Gosregister for lease rights (only 1.3% of client cases involved registration of a lease) suggests that need for guarantees of lessors' rights is not strong. It also is likely that tax avoidance influences this decision. 2. Non-use of Gosregister service points to issues regarding the convenience of service to clients. A high proportion of non-clients cited fear of bureaucracy and complexity and lack of time and means as reasons for non-usage. 3. Roughly half the surveyed clients are not aware of Gosregister's provision of information about all real estate and a third was unaware of a formal system of payment for faster processing. These are both items that Gosregister should broadcast more fully. In particular, the accessing of public property records is a basic ingredient to an efficient real estate market. 4. Media and local governments play a large role in the public's understanding of Gosregister. Gosregister should use these channels as much as resources permit. In the case of local governments, at little cost it would be easy to provide copies of materials about the requirements for registration for public display. Local governments are key for providing information to rural areas. 5. Gosregister can do more to provide information directly, including maintain phone lines and a better website. 10 Considering the very poor reputation of the two predecessor agencies (BTI and the Land Agency) prior to the establishment of Gosregister, this basically positive finding is particularly remarkable. 39 6. The level of physical access is quite good, with nearly 90% of clients having to spend under an hour to travel to their LRO. 7. LROs should consider means to encourage more of a `one stop shop' for all that is required in registration. Even if other organizations are performing the service, organizing photocopying and banking services in close proximity to LROs should be possible. 8. Only 1/3 of clients had difficulty with the registration process, and of these only about 40% had problems with Gosregister's procedures per se (other problems related to right-establishing documents or other agencies). 9. Fees are considered mostly affordable and reasonable. 11% of clients and organizations thought that they were not affordable, with an additional 14% thinking that they were too high in conjunction with other organizations' fees. Only 25% thought that the amount of fees was not justified by the services provided. These figures are a comparatively low, especially for a county which has not had a long history in recovering costs of services through official fees. Professional Competence Indicators 10. A high proportion of representatives of associated organizations who are competent clients (58%) and Gosregister staff (77%) state that staff sometimes make mistakes with data entry. 11. The most prevalent mistake is incorrect entry of names and addresses, which is not a question of professional skills, but attentiveness to detail. 12. Gosregister staff generally feel skills are average and that additional training is needed. 13. Measures are needed to increase accountability for Gosregister staff for their mistakes. The Guarantee Fund is not operational. Staff feel that they are measured in terms of timeliness rather than quality of data entry. 14. There is widespread satisfaction (77% of clients) with the speed of services. 15. Only about 5% of clients citing delays due to attempts to extract informal payments, though some professional associated organizations noted that they regularly provided such payments. Client Relations Indicators 16. More than 80% of clients and organization found that Gosregister staff behaved appropriately in carrying out their duties. 17. Most clients provide average ratings for convenience of how LROs are organized. 40 18. Convenience appears to depend on the individual effort of management, not standards. Gosregister should consider mandating basic standards, such as heating premises, size of print for information stands, and organizing other services nearby. 19. Gosregister is generally thought to be fair in its dealing with clients (2/3 of clients). 20. Assessments of corruption are largely inconclusive, though there is some corruption in the system. Only about 1/3 of clients and organizations thought that there was corruption, and only about half of these directly encountered it. About half of the respondents stated that they did not know, rather than confirm or deny that there is corruption. Some professional organizations cited making regular informal payments for services. This result indicates that Gosregister has a relatively good reputation in the specific context of the Kyrgyz Republic, where the perception of corruption within other government agencies is much higher. 21. When corruption occurs, it is to `facilitate' procedures rather than change decisions. Most cited instances of corruption were to speed up Gosregister's work and get help with other entities, while only 8% involved an effort to change the substance of what Gosregister was doing (i.e. alter areas, allow improper right-establishing documents). 22. Clients have little formal recourse to appeal adverse decisions made by Gosregister. 41 Annex 6. Stakeholder Workshop Report and Results (if any) N/A 42 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Text of Borrower's ICR Introduction For years of independence in the Kyrgyz Republic as a result of privatization of monopolistic state property a great number of private owners have developed, who own huge capital, more than 2,5 million of immovable property units. Involving them in the economy is one of the most efficient methods of overcoming poverty and developing economic growth in the country. However, overly complicated procedures of execution of bargains with immovable property and extremely incomplete and distributed at various bureaucratic offices immovable property information database, inherited from the Soviet Union, hindered development of market economy and complicated effective state management of country immovable property portfolio. Lack of clearly developed and effectively operating mechanisms of rights guarantee to immovable property made feel unconfident as new owners so as investors. In the issue objective necessity in proper registration and protection of rights to immovable property, gathering systematized and authentic information on immovable property for developing immovable property market has emerged. With the aim to create conditions for protection and guarantee of rights to immovable property State Agency on registration of rights to immovable property was founded in Kyrgyzstan in 1999. This institute is responsible for introduction new system of immovable property registration and its management. Gosregister is fundamentally new body in the system of state management of the republic. It has been founded on the base of State agency on land management, geodesy and mapping under the Government of the Kyrgyz Republic and urban and rayon Bureau of technical inventory (BTI). Taking into account social and economic importance of creating effectively operating system of state registration of rights to immovable property under modern market conditions, the Government of the KR and World Bank signed an agreement on implementing a mutual "Registration of Land and Immovable Property". Aim of the Project Main aim of the current Project is achieving and ensuring guaranteed protection of citizens and legal persons to immovable property and creating conditions for dynamic development of immovable property market, implementing over the entire territory of the KR effectively operating system of state registration of rights to immovable property. For implementation this within the frame of the current Project concrete mechanisms, procedures and technologies of unified system registration of rights to immovable property have been developed which will ensure: · maximum simplification of registration of rights procedures to immovable property for natural and legal persons; 43 · ensuring guaranteed state protection of registered rights to immovable property; · preventing emerge of disputes and facilitating to solve disputes on immovable property; · creating reliable and constantly updated informational database on immovable property over Kyrgyzstan for providing authentic information state bodies and all legal persons and citizens; · development of civilized market of immovable property, including land; · conducting constant explanatory work on rights to immovable property and guarantees on their protection among population using extensively advertising funds; · determining taxed base for imposing tax on immovable property. Pre-project situation As a result of economic reforms implemented in Kyrgyzstan number of private immovable property has increased. Transition to market economy required more immovable property to be involved in the economy. Along with this, information on immovable property was incomplete and under control of several offices and organizations which had no interaction and desire to coordinate their activities. That didn`t only hinder development of market economy, for there were no unified office that could guarantee rights to immovable property, but also complicated state and self-government management. In the result of reform, implemented within the structure of executive branch urban and rayon Bureaus of Technical Stock-Taking, within which core information on buildings was concentrated, were separated. Moreover they had different branches of subordination (Gosarhstroy, Comhozes etc). Information on land was at State Land Agency or rather at rayon and urban services of land management. Result of this was procrastination at solving issues regarding rights to immovable property, rise in price bargains execution of and sometimes deadlock because of narrow departmental interests of offices which possessed relevant information. There were 90 offices over the republic to be unified. Within the frame of the Project it was planned to found 50 registration offices with unified archives on building and land. Project indicators Donor: World Bank Credit sum: 9.42 million USD (actual 10.02 million USD) Financial conditions: 0,75% a year for 35 years, grace period 10 years Date of signing: June 29, 2000 Date of coming into effect: September 14, 2000 Date of closing: December 31, 2005 (actual December 31, 2008) Investment of the Kyrgyz Republic 2.41 million USD (actual 1.12 million USD) Government: Executing agency: State Agency on Registration of Rights to Immovable Property under the Government of the Kyrgyz Republic (Gosregister) 44 Financing and expenditure of funds. IDA funded expenses of Gosregister PIU concerned with the Project and local registration offices on following components: Institutional development, Operational service and training. The amount of project financing at the expense of IDA was 10.02 million USD or 91% of the Projects` cost (in basic costs). For repairing 50 local registration offices and buildings of the KR central Gosregister office 317.331,12 USD have been used, for equipping local registration offices goods to the sum of 1.381.746,80 USD have been purchased: · Computer equipment ­ 603.845,79; · Office equipment ­ 167.818,04; · Office furniture ­ 131.150,00; · Archive furniture­ 42.347,40; · Transport - 365.597,37; · Material for implementing system registration - 70.988,2. According to World Bank procedures all building operations have been implemented by firms which had won tender. All goods have been purchased on tender basis and passed to Gosregister for equipping 50 registration offices. In 2007 stock-taking of these goods was implemented, that confirmed their availability and target using and revise acts were executed. Besides, within the frame of the given component consultant services of foreign specialists on financial management were purchased to the amount of 26.082,27 USD as well as services of local PIU specialists to the amount of 811,749.81 USD and of local audit company to the amount of 15,374.21 USD. Operational costs aimed at current PIU and local registration payment expenses during implementation system registration by July 1, 2008 came to 815,098.19 USD. The government of the Kyrgyz Republic funded Project expenses concerned with local expenses of goods and works as well as taxes-and-duties, dues levied by Debtor on the territory of the Debtor. Share of co-financing of the Project by the KR Government came to about 1.12 million USD or 9% of the Project cost, including taxes of 1,6 million USD. Project components The Project consists of three components: institutional development, operation service, and training. 1. Institutional development: Institutional development of Kyrgyzstan registration system first of all concerned with creating decentralized local registration offices over the entire territory of the KR. In accordance 45 with step-by-step local registration offices opening approved by the Resolution of the Kyrgyz Republic Government on August 14, 1999, 50 registration offices have been opened officially and they are operating successfully implementing sporadic registration of rights to immovable property. In accordance with agreements signed with managers of local state administrations buildings for offices have been provided by local authorities without return. And building repairing and providing with relevant equipment was funded by credit funds of the World Bank and implemented by Gosregistr. Since opening of unified local offices execution of rights to land and immovable property, registration, information output on rights and encumbrances have been implemented at one office. Now there is no waste of time when serving clients and it is possible to solve all issues regarding ownership to immovable property (including land) without procrastination. Confidence to registration system has risen, various kinds of inquiries on registered rights and encumbrances to immovable property that increase day by day is evidence of that fact. Number of bargains with immovable property has increased greatly, including mortgage ones. Within the frame of the Project it has been planned to register 200 000 rights in sporadic order. Gained results exceed aimed plans four times and come to 805 000 of registered rights. The next aim of Gosregister is ensuring maximum access to information on immovable property for participants of immovable property market and transparency of local registration offices activity. This will enhance quality of provided service and create conditions for elimination of corruption. In course of project realization in 27 local offices ARS have been implemented. Using ASR terms of registration have been greatly reduced and procedure of documents reception has been simplified. Implementing ARS not only facilitates efficient information output of various kind but it is also first step to creating Land Information System on immovable property over the country. Currently all offices of Gosregister execute their activity on principles of self-financing and self-repayment. At the same time cost of service to registration of rights does not exceed one USD for natural persons and two USD for legal ones independently of size and kind of real property unit. 2. Operational service Operational service of the Project includes implementing system registration, preparing registration maps, conducting advertising campaign. System registration of rights to immovable property is the most expensive and laborious part of the component 2. The aim of implementation system registration was creating conditions for protection and guarantee of rights to real property of poor population sectors who has no funds to pay for registration service, in some cases they have no legal documents and sometimes they do not understand necessity of rights registration. 46 Within the frame of the Project tender for firms and specialists of system groups has been executed and they implemented system inspection of real property units and preparing documents to state registration of rights to real property. Selected specialists were trained at training centers, certified and provided with special uniform and identity card. Providing with applications of registration documents, copies of registration cards, archive furniture, office equipment and its employing in the course of system registration have been implemented at the expense of Project funds. System registration of rights to real property in human settlements was launched at the end of 2000 in Issyk-Ata, Kara-Suu rayons and in Bishkek. Subsequently after official openings of registration offices, system registration was implemented in accordance with plan at all registration offices. At each registration area workshops were conducted ­ launch with participation of local administration workers, state structures, community representatives, and each village there were meetings for informing and explanation essence of system registration to population. Implementing those activities facilitated successful cooperation of all institutes and organizations which had information on real property; right holders became interested in provision relevant documents for registration that expedited process of system inspection. System registration in human settlements was implemented in 2006; in the result of it rights to 1 million 300 thousands of IPU have been registered. Besides, archive and electronic database on all real property in towns and villages has been created. The following is information on paces of system registration for period 2000 ­ 2006 January 1 January 1 January 1 January 1 January 1 January 1 2001 2002 2003 2004 2005 2006 All the information on rights and real property itself has been entered in electronic database. Currently information on all immovable property units is concentrated at registration offices and constantly updated. This unique database lets create taxable database on all real property. 47 The second stage was implementing system registration of land shares. Land reform was implemented in speeded paces and often by specialists who had no special topographic and legal knowledge. Thus, gathering of initial information on land share owners required more time and human resources. Moreover, Kyrgyzstan which is agrarian country, plough-land is only capital for rural population and any mistake or unfairness during registration of rights to land shares could result social explosion. Owing to close cooperation of PIU specialists, local registration offices and ayil-okmotu this work has been implemented successfully. The following is the information on course of implementing registration of rights to land shares: January 1 January 1 January 1 January 1 2005 2006 2007 2008 According to Credit agreement according to results of project realization it was necessary to register 600000 rights to immovable property. It was supposed by the Project budget that costs for inspection will come to 9 USD. According to project results costs for inspection and registration of rights to immovable property unit came to 3 USD and following results have been achieved: Type of registration Planned Implemented Comments The plan has been over- System registration 600 000 2 706 239 fulfilled 3,5 times One of the key aspects of implementing system registration is public informing (familiarization) of system inspection results. In the course of public informing familiarization of community with lists of right holders has been implemented. All those who were interested could check-up if an owner had been determined correctly or information on encumbrances and limitations had been authentic. Lists of right holders during the determined terms were displayed at public places where specialists fixed all complaints and desires of owners and right holders who got acquainted with lists. 48 Report on the period since the beginning of the system registration of land plots located outside settlements by 01.01.2008 including Number of Number of Number of Numb Number of of them units units Sporadic Field- IPUs drawn Not ready Registration er of IPUs with entered in investigated registratio surveyed on Ready for for zones sub- assigned Ready for Ready for the in LRO n units registration full registratio zones ID-codes registration preliminary electronic archives index map registratio registration n n form Karasu 13 59578 77 116559 116636 116636 97900 85188 12712 18659 113398 Nookat 20 66065 473 129553 130496 130496 129373 115688 13685 180 118750 Uzgen 13 11377 180 100154 100334 100334 100154 90620 9534 0 85258 Aravan 5 16933 344 26372 26716 26716 19384 17630 1754 6988 26716 Kara-Kuldja 12 4526 338 48820 49158 49158 47178 23827 23351 1642 31778 Alay 9 2858 14 21784 21798 21798 21773 15869 5904 11 20101 Chon-Alay 8 2800 0 5911 5911 5911 5809 5659 150 102 5861 Total in the Oblast: 80 164137 1426 449153 451049 451049 421571 354481 67090 27582 401862 Suzak 17 55411 198 102808 102808 102808 102450 44221 58229 358 102808 Bazar-Korgon 12 43914 42 43872 43914 43914 43872 19072 24800 0 41508 Aksy 17 14224 276 49034 49034 49034 48982 26695 22287 52 49034 Ala-Buka 17 5995 46 33536 33536 33536 32739 10679 22060 797 33536 Nooken 10 18958 944 26580 26580 26580 26289 16601 9688 291 26580 Toktogul 11 31715 20 31715 31715 31715 31715 22963 8752 0 31715 Chatkal 6 8139 70 8069 8139 8139 8051 4212 3839 18 8139 Total in the Oblast: 90 178356 1596 295614 295726 295726 294098 144443 149655 1516 293320 Batken 0 18658 116 73676 73676 73676 73555 46196 27359 121 73676 Leilek 0 72173 933 83441 83441 83441 83223 52232 30991 218 83441 Kadamjay 0 325 175 61467 61467 61467 59315 32049 27266 2152 61467 Total in the Oblast: 0 91156 1224 218584 218584 218584 216093 130477 85616 2491 218584 Talas 0 18964 964 18000 18000 18000 15041 5905 9136 2959 18000 Bakay-Ata 7 10803 595 10208 10805 10803 10009 7933 2076 199 9600 Kara-Bura 9 14561 470 14746 15726 15726 14091 9956 4135 655 13893 Manas 7 7390 405 6985 7390 7390 6155 4519 1636 830 6985 Total in the Oblast: 23 51718 2434 49939 51921 51919 45296 28313 16983 4643 48478 49 including Number of Number of Number of Numb Number of of them units units Sporadic Field- IPUs drawn Not ready Registration er of IPUs with entered in investigated registratio surveyed on Ready for for zones sub- assigned Ready for Ready for the in LRO n units registration full registratio zones ID-codes registration preliminary electronic archives index map registratio registration n n form Kemin 0 7144 405 10893 10893 10893 9331 4898 4433 1562 10893 Chui 0 6056 1142 10821 10821 10821 7594 4930 2664 3227 10821 Issyk-Ata 0 11827 2097 25905 25905 25905 24169 13165 11004 1736 25905 Alamedin 0 4344 3765 20609 20609 20609 19609 13396 6213 1000 20609 Sokuluk 0 16591 4846 34695 34695 34695 32545 22185 10360 2150 34695 Moscow 0 7635 647 9553 9553 9553 7132 553 6579 2421 9553 Panfilov 0 3792 1516 7385 7385 7385 5985 3784 2201 1400 7385 Jayil 0 14157 750 14218 14218 14218 12466 8439 4027 1752 14218 Total in the Oblast: 0 71546 15168 134079 134079 134079 118831 71350 47481 15248 134079 Naryn 0 7061 144 15816 15816 15816 15667 13747 1920 149 15816 Kochkor 0 5055 81 14637 14637 14637 14444 9721 4723 193 14637 Jumgal 6 6253 171 12960 12960 12960 12471 8130 4341 489 12454 Atbashy 8 2211 826 17000 13528 13528 15383 10618 4765 1617 12950 Ak-Tala 11 5200 17 7123 7123 7123 6527 5246 1281 596 7123 Toguz-Toro 5 6124 0 6124 6124 6124 6124 5286 838 0 6124 Total in the Oblast: 30 31904 1239 73660 70188 70188 70616 52748 17868 3044 69104 Ak-Suu 0 10468 269 22342 22611 22611 16250 10912 5338 6092 22611 Issyk-Kul 0 12066 2469 17203 19672 19672 13520 11892 1628 3683 19672 Ton 0 11853 907 14204 15111 15111 13565 11378 2187 639 15111 Jety-Oguz 10 18411 1432 28616 28616 28616 23375 15442 7933 5241 28616 Tyup 9 22233 1499 20734 20734 20734 17870 15621 2249 2864 19313 Total in the Oblast: 19 75031 6576 103099 106744 106744 84580 65245 19335 18519 105323 Total in KR 242 378915 29663 1324128 1328291 1328289 1251085 847057 404028 73043 1270750 50 Report on the progress of systematic registration by January 1, 2006. Registration zones Number of Sporadic Field- Number Number of Number of including Legalized Number units registration surveyed of IPUs IPUs IPUs of them Not ready property of units investigated units with drawn on drawn on Ready for Ready for Ready for for entered in LRO assigned registration transparent registration full preliminary registration in the archives ID- index map film registration registration electronic codes form. Osh 56292 4449 67006 67006 67006 0 52011 43564 8447 14995 4043 67006 Kara-Suu 9144 1679 65027 65027 65027 6001 42338 33419 8919 22689 38685 65027 Nookat 1144 112 51877 51877 51877 28153 48018 46278 1740 3859 43990 51877 Uzgen 43702 1136 43702 43702 43702 12486 39056 27786 11270 4646 26541 43702 Aravan 7089 916 25123 25123 25123 13652 23775 23398 377 1348 17297 25123 Alay 11405 2168 17032 17032 17032 4200 15644 14589 1055 1388 16640 17032 Chon-Alay 0 0 6446 6446 6446 2000 6177 6156 21 269 4993 4800 Kara-Kuldja 484 125 18682 18682 18682 2500 17847 17276 571 835 15330 15742 Total in the Oblast: 129260 10585 294895 294895 294895 68992 244866 212466 32400 50029 167519 290309 Jalal-Abad 20529 1731 23547 23547 23547 23547 21584 15517 6067 1963 3439 23547 Suzak 2505 1117 51845 51845 51845 36483 45721 38844 6877 6124 36921 51845 Bazar-Korgon 3360 395 27593 27593 27593 23016 25705 23088 2617 1888 20875 27593 Karak-Kul 6069 47 11484 11484 11484 11484 10176 8211 1965 1308 4116 11484 Tash-Kumyr 9295 70 12419 12419 12419 12419 9517 7784 1733 2902 1071 12419 Maily-Suu 9154 156 11043 11043 11043 11043 8715 7366 1349 2328 1873 11043 Nooken 6801 1297 27239 27239 25131 11899 26093 24364 1729 1146 18623 27239 Aksy 4837 1485 28671 28671 28083 22787 26176 25813 363 2495 23713 28671 Ala-Buka 2354 429 21190 21190 20957 11944 17810 16295 1515 3380 17810 21190 Toktogul 2586 1123 21704 21704 18931 16500 18243 17425 818 3461 12962 21704 Chatkal 543 512 5033 5033 4796 3150 4292 4249 43 741 4202 5033 Total in the Oblast: 68033 8362 241768 241768 235829 184272 214032 188956 25076 27736 145605 241768 Batken 4891 525 24482 24482 24675 18200 22770 21793 977 1712 15823 24482 Leilek 7137 631 25899 25899 27498 27498 24306 22500 1806 1593 15845 25899 Kadamjay 16788 1419 46341 46341 42729 27325 45429 44436 993 912 33626 42000 Kyzyk-Kia 16027 140 16578 16578 10813 10813 16274 12572 3702 304 610 16578 Sulukta 1165 33 5054 5054 3531 3531 3944 3762 182 1110 1121 5044 Total in the Oblast: 46008 2748 118354 118354 109246 87367 112723 105063 7660 5631 67025 114003 City of Talas 8646 196 9116 9116 9923 9923 7491 6717 774 1625 666 9116 Talas rayon 4716 655 16879 16879 16759 8806 15893 15385 508 986 14591 16879 Kara-Bura 3867 1394 14403 14403 14403 3003 12888 11091 1797 1515 11897 14403 Manas 2155 626 10884 10884 10884 3500 10149 10091 58 735 10593 10884 Bakay-Ata 2124 1111 13621 13621 14429 4500 13173 9172 4001 448 12432 12830 Total in the Oblast: 21508 3982 64903 64903 66398 29732 59594 52456 7138 5309 50179 64112 51 Registration zones Number of Sporadi Field- Number of Number Number including Legalized Number of units c surveyed IPUs with of IPUs of IPUs of them Not ready property units investigated registrat units assigned drawn on drawn on Ready for Ready for Ready for entered in in LRO ion ID-codes registrati transparen registratio full for registratio the archives on index t film n registratio prelimi n electronic map n nary form. registrat ion Chui 28573 2352 34695 34695 34695 24975 29636 20017 9619 5059 5978 34695 Alamedin 15443 2485 45890 45890 45890 4589 35340 28170 7170 10550 16323 45890 Sokuluk 18562 2431 49191 49191 49191 2115 34193 22687 11506 14998 8700 49191 Jayil 29695 2634 34834 34834 34834 23900 28745 20651 8094 6089 923 27405 Kemin 6300 1384 16186 16186 13399 6120 13700 11625 2075 2486 6667 16186 Issyk-Ata 24199 2441 39018 39018 32637 10010 25440 18819 6621 13578 7117 39018 Moscow 21877 2008 22962 22962 20158 13889 16791 6800 9991 6171 3773 22962 Panfilov 5761 1221 15124 15124 12932 12127 11422 9463 1959 3702 6407 15124 Total in the Oblast: 150410 16956 257900 257900 243736 97725 195267 138232 57035 62633 55888 250471 Naryn 5359 1003 21395 22398 18588 18588 17354 14874 2480 4041 8541 22398 Kochkor 1144 951 15375 16326 14783 14783 15281 13145 2136 94 10162 16326 Jumgal 1805 748 10521 10521 10358 7267 10178 9120 1058 343 8943 10075 Ak-Tala 2067 875 6702 7577 7401 3640 6439 5557 882 263 3641 7577 At-Bashy 1399 1254 11755 13009 13009 10991 11710 10056 1654 45 7882 11771 Toguz-Toro 283 113 5210 5210 2606 0 5190 4962 228 20 4326 2899 Total in the Oblast: 12057 4944 70958 75041 66745 55269 66152 57714 8438 4806 43495 71046 Issyk-Kul 5922 1125 24140 25255 22886 22000 17949 14129 3820 6191 8382 24140 Balykchy 11330 246 14356 14602 9492 9492 12412 10211 2201 1944 2010 14602 Ton 718 490 15398 15888 15004 15004 14555 13588 967 843 11359 15398 Ak-Suu 28472 2105 40358 42463 32845 21453 37139 35747 1392 3219 13361 42463 Tiyp 6777 1783 14561 16344 16344 583 14159 13152 1007 402 9641 14561 Jety-Oguz 6393 2325 22136 24461 24461 13710 21490 20144 1346 646 21172 20455 Total in the Oblast: 59612 8074 130949 139013 121032 82242 117704 106971 10733 13245 65925 131619 City of Bishkek 181204 27357 202370 217000 0 0 178098 153794 24304 24272 0 217000 Total in KR 668092 83008 1382097 1408874 1137881 605599 1188436 1015652 172784 193661 595636 1380328 52 The systematic registration component had a wide social orientation. During the systematic registration not only free state registration of owner's and IPU user rights was performed, resulting in 270 mln. som savings, but also rights to those property units lacking right-establishing documents were legalized (regularized). Cumulative Regularization of rights to immovable property during the systematic registration: 700000 661890 595636 600000 500000 400000 300000 200000 100000 12400 0 2000 2001-2006 2007 Besides, more than 2.5 thousand persons were employed with fixed salaries and for a certain period of time as local consultants (specialist) to fulfill the systematic registration. Preparation of registration maps has become one of the most complicated issues of the systematic registration given the lack of baseline maps in scale 1:2000. For settlement areas only 65 % of such maps were available. In order to deal with this situation, in settlement areas lacking map data, adequate cadastral maps were produced by scanning maps of scale 1:10000, by maximizing images till required scale and by digitalizing them. Besides, for the cities of Bishkek and Osh, aerial material produced under the Swiss programme and available at Goscartographia, were used for production of cadastral maps for settlement areas by cameral deciphering of photographs. As a result of this cooperation, using credit funds, digital maps for the cities and Osh were produced. At present, all electronic mapping information is up-to-date as all changes and new IPU boundaries were drawn on them during the sporadic registration of rights. Public awareness and advertisement One of the factors that contributed to the success of the Project was the initiation of the public awareness campaign. Within the framework of the Project, in each registration 53 zone a number of meeting with local government representatives, judges, notaries, state architecture control specialists, communities were conducted in order to explain to the citizens and legal persons their rights to immovable property in both sporadic and systematic order, a number of local newspapers were issued with articles explaining the essence of the state registration of rights, aims and procedures of systematic registration, audio and video trailers were launched on Republican and local radio and television. During the systematic registration nearly 1000 rural gatherings were arranged where apart from the explanation, newsletters and special editions were disseminated among communities. 3. Training Preparation of qualified personnel for state registration of rights to immovable property is one of the main tasks of the Project. Given the fact, that all workers previously working at BTI and land administration system, know little about the new registration system and methods of its implementation, the Project has re-trained all the workers without exception. In addition, a number of seminars were conducted concerning registration aimed at successful cooperation between concerned institutions and interacting organizations. Training Centers For training purposes and for raising qualification of Gosregister employees, constantly functioning training centers were opened in the cities of Kant and Osh. World Bank credit funds were also used to equip these auditoriums with computers, overhead projectors and other training equipment. Leaders of these training centers and chairpersons were selected on competitive basis and are being paid from Project funds. In 2003 the Osh training center was transferred to the Osh Registration Office of Gosregister and in 2004 the Kant training center was moved to Bishkek. All office equipment was given to the Gosregister. A training plan for every category of trainees has been developed and agreed upon with the plan of gradual opening of local registration offices across the territory of the Kyrgyz Republic. Training of Gosregister specialists and the personnel in systematic registration was performed by Gosregister, PIU and invited lecturers. · Training of Gosregister employees (sporadic) Training of Gosregister employees. The first phase of training of Gosregister specialists consisted of: · the introductory course for all employees involved in land survey and registration of rights to immovable property in city and rayon offices. · training seminars for heads of offices and departments. 54 · within the framework of the Project were trained: heads of local registration offices numbering in 261 person, heads of departments numbering in 200 persons. specialists on land cadastre, IT, and office managers - 280 specialists. The second phase of training specialists, directly involved in state registration involved: Cadastral surveyors ­ trained in obtaining knowledge and practical skills useful for production of index maps and maps of zones. By itself the course represent lectures about the theory map alteration and production, combined with practical classes. · Training of registrars, specialist on reception of documents The programme for training registrars and specialists on reception of documents covers some aspects related with justification for formation and termination of rights to immovable property. Practical courses for listeners is conducted separately for registrars, specialists at reception desk and surveyors. Upon completion of the training course the listeners were examined and handed in certificates. The total number of trained during the Project implementation period is: 1001 specialists on sporadic registration, as indicated in the below table by year: Training of Specialists in Sporadic Registration 2000 2001 2002 2003 2004 2005 2006 2007 2008 Registrars 74 75 64 44 31 21 76 66 20 Spec. on 64 46 34 21 20 10 31 15 16 reception and delivery Cartographers 31 40 68 9 56 18 20 25 6 Accountants 130 70 75 81 114 36 and Economists Land surveyors 119 Land inspectors 46 Heads of dep-s 120 101 171 Heads of 105 56 10 48 offices Total 169 161 166 74 107 49 127 106 42 Training seminars for accountants of local registration offices were conducted on annual basis. Seminar programs covers such issues as recording of main turnover means obtained from credit funds, financing of work on systematic registration, reporting, taxation, etc. 55 · Training of personnel in systematic registration Systematic registration personnel, selected by Gosregister on competitive basis, have been trained in Training Centers of the Gosregister. Specialist on legal cadastre and cadastral surveyor have attended a training course in establishment of rights to immovable property. 2609 specialists were trained, as indicated in the below table by year. Training of Specialists in Systematic Registration 2000 2001 2002 2003 2004 2005 2006 2007 Specialists on 50 447 187 197 215 97 159 25 legal cadastre Cadastral 50 355 152 179 237 77 166 16 surveyors Total 100 802 339 376 452 174 325 41 Project monitoring Gosregister apparatus and the PIU during the whole period of Project implementation have performed regular monitoring and analysis of formation, development and operation of the registration system with consideration on Project's main performance indicators. For this purpose, a team of specialists on monitoring was selected: national and regional monitoring coordinators. Local registration offices submit monthly report on performed works, reflecting the number of registered rights and encumbrances, number of secondary transactions, number of mortgages, number of property units covered by systematic registration, number of disputable situations, number of complaints to local registration offices, number of legalized registration rights during the systematic registration. Regional specialists on monitoring have taken control over the quality and timeliness of services provided during sporadic registration. In doing so, a major attention was paid to transparency on registration and pricing. For this purpose, information stands were established in reception and delivery halls, help-lines and complaint boxes were also established at reception and delivery halls. All information about the work of registration offices with customers was analyzed by regional specialists on monitoring and was submitted to PIU and Gosregister management. During the process of monitoring of the systematic registration, regional specialists have not only controlled the quality and the speed of works on systematic registration, but they have also organized meetings and gatherings with communities, villagers and local government employees. Regional specialists on monitoring also 56 coordinated interaction between local registration offices, local government and city administrations. This very fact served as the key to the success of the systematic registration of land shares. Financial management PIU Financial Group responsible for Project's financial management, payments, book- keeping and financial reporting and internal control, was directly involved in recording of expenses of the PIU. The PIU has purchased on centralized basis vehicles, equipment, furniture, materials for the PIU, Gosregister, regional offices and Training centers and uniforms for systematic registrars. Distribution of goods to registration offices and training centers was made according to Gosregister's order by acceptance acts. PIU Financial Manager was coordinating the work of the accountants of local registration offices with the regard to expenditures by the Project, and recorded main funds and materials. The PIU has trained accountants of registration offices in procedures for keeping record of Project expenses and produced special forms to be used by registration offices in their reports to PIU. The audit of Project's financial activities was conducted annually. International auditor was purchased through bidding process. The cost for audit was financed from credit funds. In addition, each year the Parliament of the Kyrgyz Republic's Audit Chamber was checking our financial activities, resulting in no objection on their part. Social and economic benefit of the Project Successful Project implementation that resulted in efficiently functioning system of state registration of rights to immovable property has significant social and economic benefit. Systematic registration of rights to immovable property has made it possible to provide an absolutely free state guarantee and security of rights to immovable property for poor groups of population. Moreover, property owners, whose rights were not registered in an established order, acquired their right-establishing documents through the procedure which was made as easy as possible for them during the systematic registration. This has created an opportunity for many to use property as starting capital, to get mortgages, thus overcoming the poverty. 57 Dynamics of mortgages over the country between 2002 and 2007 Mortgage operation of the property market increase each year and during the period between 2002 ­ 2007 was increased in average by 20% . Mortgages in mln. USD Table 6 Not only the registration procedure itself was considerably simplified but the procedure of getting credible information about the rights and encumbrances was simplified as well. The electronic property data base, developed within the framework of the Project, and consisting of more than 2,5 mln. property units, helps state authorities 58 and local self-governments to effectively manage land resource. This data base serves as the base for formation of the fiscal cadastre. Successful completion of the Project "Registration of Land and Real Estate" is the result of efficient joint activity between the World Bank, Swedesurvey, Gosregister and the Ministry of Finances of the Kyrgyz Republic. High professionalism of the World Bank team, understanding of political and economic situation in Kyrgyzstan, competence of Swedesurvey international consultants in solution of questions concerning the choice of the model for registration system, timely consultancy support, effective solution of financial problems and consideration of presented documents, the work of the Ministry of Finance concerning co-financing allowed the Gosregister team not only to fulfill all the requirement of the credit agreement, but even to over-perform them by several times. 59 Annex 8. List of Supporting Documents Project Appraisal Document, Kyrgyz Republic, Land and Real Estate Registration Project, May 8, 2000, Report No. 20418-KG Project Appraisal Document, Kyrgyz Republic, Second Land and Real Estate Registration Project, June 18, 2008, Report No. 44045-KG Final Report on the Land and Real Estate Registration Project, (Borrower's ICR), September 2008 Development Credit Agreement, Kyrgyz Republic Land and Real Estate Registration Project, June 29, 2000, Credit No. 3370 KG Kyrgyz Republic: Land Registration Project, Social Assessment, December 1999 Mid-Term Social Assessment of the State Agency for Registration of Immovable Rights (Gosregister), May 2004 Assessing Gosregister's Performance: Building Monitoring Capacity and Public Opinion Survey Results, (Beneficiary Survey), September 2007 Updated Proposal: Business Plan framework 2009 ­ 2011 for Land and Real Estate Registration at Gosregister, Daninge Danielson, Version 0.98, November 3, 2008 Kyrgyz Republic, Land and Real Estate Registration Project, Economic and Fiscal Analysis for the Ongoing and Repeater Projects, Suha Satana, March 2008 Women's Rights to Land in the Kyrgyz Republic, Renee Giovarelli, et. al., June 2001 Seminar on Women's Rights to Property Associated with the Land and Real Estate Registration Project in the Kyrgyz Republic, Report No. 3.1.1, Swedesurvey, March 2002 Quality of Supervision Assessment (QSA6), Kyrgyz Land and Real Estate Registration Project, September 2004 Implementation Review Report of the Kyrgyz Republic Land and Real Estate Registration Project (P049719) for the Quality at Entry Review of a Proposed Repeater Project ­ Second Land and Real Estate Registration Project, July 2007 Land and Real Estate Market Development: Valuation and Taxation of Immovable Property, Report No. 3.4.9, Swedesurvey, April 2003. Aide Memoires, PSRs and ISRs for the Project 60