Document of The World Bank Report No: 28931 IMPLEMENTATION COMPLETION REPORT (IDA-31350) ON A CREDIT IN THE AMOUNT OF SDR 6.0 MILLION (US$8.0 MILLION EQUIVALENT) TO THE REPUBLIC OF ARMENIA FOR A TITLE REGISTRATION PROJECT June 22, 2004 South Caucasus Country Unit Environmentally and Socially Sustainable Development Sector Unit CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2004) Currency Unit = Armenian Dram (AMD) 1000 AMD = US$ 0.018 US$ 1.00 = 550 AMD FISCAL YEAR January 1 - - December 31 ABBREVIATIONS AND ACRONYMS CIS = Commonwealth of Independent States EU = European Union EU-FSP = EU-Food Security Program GOA = Government of Armenia GPS = Gobal Positioning System IO = Information Office IRC = Information and Registration Center LMI = Land Management Institute Marz = administrative region MOF = Ministry of Finance PHRD = Population & Human Resources Development SAR = Staff Appraisal Report SCA = State Cadastre Agency SCRPC = State Committee on the Real Property Cadastre SIDA = Swedish International Development Agency SDC = Swiss Development Cooperation TA = Technical Assistance USAID = United States Agency for International Development Vice President: Shigeo Katsu Country Director Donna M. Dowsett-Coirolo Sector Manager Joseph R. Goldberg Task Team Leader Gotz A. Schreiber ARMENIA Title Registration Project Implementation Completion Report CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 4 5. Major Factors Affecting Implementation and Outcome 11 6. Sustainability 12 7. Bank and Borrower Performance 13 8. Lessons Learned 15 9. Partner Comments 17 10. Additional Information 20 Annex 1. Key Performance Indicators/Log Frame Matrix 23 Annex 2. Project Costs and Financing 24 Annex 3. Economic Costs and Benefits 26 Annex 4. Bank Inputs 29 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 31 Annex 6. Ratings of Bank and Borrower Performance 32 Annex 7. List of Supporting Documents 33 Annex 8. Borrower's Completion Report 34 Project ID: P057560 Project Name: Title Registration Team Leader: Gotz A. Schreiber TL Unit: ECSSD ICR Type: Core ICR Report Date: June 22, 2004 1. Project Data Name: Title Registration L/C/TF Number: IDA-31350 Country/Department: ARMENIA Region: Europe and Central Asia Region Sector/subsector: Central government administration (100%) Theme: Legal institutions for a market economy (P); Personal and property rights (P); Land management (P); Rural markets (P) KEY DATES Original Revised/Actual PCD: 06/20/1996 Effective: 03/23/1999 04/14/1999 Appraisal: 12/02/1997 MTR: 03/31/2001 05/11/2001 Approval: 10/13/1998 Closing: 12/31/2002 09/30/2004 Borrower/Implementing Agency: GOVERNMENT OF ARMENIA/STATE COMMITTEE ON THE REAL PROPERTY CADASTRE Other Partners: STAFF Current At Appraisal Vice President: Shigeo Katsu Johannes Linn Country Director: D-M Dowsett-Coirolo Judy O'Connor Sector Director: Laura Tuck Kevin Cleaver Team Leader at ICR: Gotz A. Schreiber Mark Lundell ICR Primary Author: Gotz Schreiber; Surajit Goswami; Gavin P. Adlington 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: HS Sustainability: HL Institutional Development Impact: H Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The overall aim of the Title Registration Project (TRP) was to promote private sector development by implementing a transparent, parcel based, easily accessible, and reliable registration system for land and other immovable property. Once developed, this system was to provide a chronological record of property owners and their rights and obligations. The ready availability of this information was expected to reduce the transaction costs in title transfers and mortgage financing and, combined with the security of property rights recorded in the system, lead to increased productivity and value of land and other real estate, consolidation of fragmented rural land ownership, increased use of property as collateral, and general improvement of the efficiency of rural and urban real estate markets. In addition, the project was to promote least-cost registration procedures by building on existing data bases of property information, adding only market-relevant information to these databases, and by contracting private surveyors. The objectives of securing property rights and increasing property market efficiency remain highly relevant in Armenia and are consistent with the Bank's assistance strategy, which emphasizes support for economic growth led by the private sector. 3.2 Revised Objective: The original objectives remained appropriate throughout the implementation period and were not revised. 3.3 Original Components: The project comprised three components. Establishing a Network of Information and Registration Centers (US$2.92 million, or 30.3 percent of projected total cost, excluding unallocated resources). Representing the core structure of the cadastral system, a nation-wide information and registration network was to be established for the secure registration and retrieval of records on real estate parcels and associated property rights, comprising a central information center and 25 local Information and Registration Centers (IRCs) throughout the country. The project would (a) equip and furnish these centers, (b) establish a computerized information network for managing the cadastral data, (c) upgrade the staff capacity of the system, and (d) finance the systematic registration of some 580,000 rural and 250,000 urban real estate titles and the entry of an estimated 740,000 titles and other documents into the system. Non-labor operating expenses were to be funded on a declining scale over the project period. Surveying and Cadastral Mapping (US$6.12 million, or 63.5 percent of projected total costs). This component was to support the updating of existing surveys and the implementation of new systematic surveys, using mainly private licensed surveyors, and the production of updated cadastral maps. It was to (a) equip and furnish the Mapping Center, (b) contract systematic cadastral surveying to private surveyors so as to support the development of the surveying industry, (c) enhance the GPS grid, (d) obtain satellite imagery, and (e) fund orthophotomapping. Non-labor operating expenses for survey and mapping works were to be funded on a declining scale over the project period. 80 village survey updates and 336 complete village surveys were to be undertaken, along with 30 square km of high-density and 150 square km of low-density surveys in urban areas. - 2 - Equipping and Operating a Project Implementation Unit (US$0.60 million, or 6.2 percent of projected total costs). The project was to establish a Project Implementation Unit (PIU) and finance its operating expenses. The PIU was to coordinate and oversee project implementation and manage project procurement and finances. In addition, this component was to fund a study on cost recovery as well as the establishment and operation of a practical monitoring and evaluation system to ensure timely qualitative and quantitative feedback on project implementation. US$0.93 million, or 8.8 percent of the projected total project cost, were unallocated and available to cover expenditures unforeseen at the time of appraisal. 3.4 Revised Components: There were no revisions in component objectives or basic structure or content. However, some activities within components were modified during implementation so as to take account of other donors' activities or to respond to advances in technology. Several specific cases stand out in this respect: Ø SIDAfinancedtheupgradingofthegeodeticnetworkaswellastechnicalassistanceintitle registration, and USAID provided most of the early TA in registration. These activities had been expected to be financed by the Credit, and the subsequent availability of grant resources from bilateral donors freed credit funds for activities not initially foreseen: surveys to clarify community boundaries, surveys to inventory irrigated lands, and the printing of critically needed title and other certificates. Ø BecausetheEU,underitsFoodSecurityProgram(FSP),agreedtofinancesubstantialsurvey work in rural areas, IDA agreed to shift the focus of its survey activities to the urban areas. Ø WhenSwitzerlanddecidedtofinanceaerialphotography,mappingandassociatedTAandtraining, the project capitalized on this by funding the acquisition of a photogrammetric workstation and developing in-house capacity for processing high-resolution satellite imagery and producing image-based maps, a new technology that very efficiently complemented ground surveying. 3.5 Quality at Entry: Quality at entry was satisfactory. There was no assessment by the Quality Assurance Group which was nascent at the time. Peer reviewers and Bank management considered the project objectives consistent with the 1997 Country Assistance Strategy which focused on consolidating the recovery of economic growth through rapid development of the private sector and ensuring the social sustainability of the reform process. The key project design issues, developed with funding from a Japanese PHRD Grant, were based on experience gained in similar projects in other CIS countries and on prior USAID support for the Pilot Title Registration Project during 1994-1996. The State Cadastral Administration (now the State Committee on the Real Property Cadastre, SCRPC) had some experience dealing with external donors and played an important part in project preparation. The institutional structure and capacity for effective project management, including financial and procurement management, were in place. The key risks were adequately identified and addressed. The overall project design was appropriate to the client's needs and to achieving the project's development objectives, and the allocation of resources to the different project components was realistic and commensurate with needs. Over 63 percent of the base costs were allocated to support the work on surveying and cadastral mapping, while 30 percent was for institutional strengthening, capacity building and improving service delivery. Only 6 percent of the base costs were envisaged for project administration, including monitoring & evaluation. - 3 - The project aimed to achieve about 50 percent survey coverage of all land parcels and real estate properties in both rural and urban areas. The remainder was expected to be covered from GOA's own resources and/or support from other donors who would consider the project objectives and design to be suitable for providing additional assistance. This proved to be the case, when the EU-FSP agreed to finance surveys and registration of rural properties. The project's modular design also attracted subsequent support from both Switzerland and Sweden for technical assistance, capacity building, aerial photography and technological upgrading. Notable, too, was the project's emphasis on using the private sector for survey work and on competitive contracting; this provided a strong stimulus for the development of a vibrant private surveying industry and it also reduced the unit costs for surveying by 50 percent over the course of project implementation. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The objective of securing property rights was fully achieved. The SCRPC now has 47 fully functioning Information and Registration Centers (IRCs) throughout the country (each covering, on average, about 600 square kilometers) that provide a systematical and uniform register of parcels and buildings and an efficient registration service. Almost all of the country's 2.5 million privately owned land parcels and buildings have been surveyed. 1.136 million property records are already in the central database, and the remainder are expected to be entered by early 2005. The unified title registration system is based on and supported by appropriate legislation and implementation regulations. IRC staff are well trained, work efficiently, and provide reliable service in a business-like environment, at reasonable cost, and with high service standards. Information is provided to clients within a day, and registration of real estate transactions takes one day for most cases and up to three days for more complicated ones. This compares favorably with any system in the world and is considerably better than in most ECA countries. Property owners whose real estate is registered in the cadastre have fully secure property rights, and cadastre records are recognized in the market as totally reliable. Property owners, real estate agents and banks are satisfied with the service they receive. Table 1: Real Estate Market Transactions Registered Type of Property 2000 2001 2002 2003 Apartments 16,070 17,319 27,031 30,845 Private Houses 5,157 4,838 8,261 11,469 Cottages 383 498 730 900 Industrial Use 1,150 4,270 2,300 1,943 Public Use 3,507 4,140 9,963 11,119 Garages 298 221 333 925 Land Plots 3,663 9,517 12,256 14,596 of which: Agricultural Plots 2,990 6,995 7,733 7,930 Total 30,228 40,803 60,874 71,797 Annual Increase (%) .. 35 49 18 The objective of increasing property market efficiency was also achieved. Essentially dormant until about 1996, the real estate market now continues to grow quite rapidly each year (see Table 1 above). The active market is still small, with about 1.8 percent of all properties in 2003 sold, leased or mortgaged ­ but has more than doubled since the end of the long slump of 1998-2000. If the growth rates of the past three years are sustained, the active market will exceed the 5 percent mark in 2008 ­ a measure considered - 4 - very active by international comparisons. The determined efforts made in recent years to improve service quality and eliminate illegal conduct by IRC staff have been very important in generating client confidence and spurring registered market transactions. At the same time, the publicity and information program implemented by the SCRPC has made the public more aware of the opportunities available to property owners to transact and invest. Although this market expansion is certainly attributable in part to the general improvement of the economy, project activities undoubtedly had a significant impact as well -- especially the emphasis since 2000 on service quality. The Staff Appraisal Report (SAR) suggested measuring project outcome also in terms of the use of immovable property as collateral and of the decline in the real cost of borrowing. Registered mortgages rose rapidly when it first became possible to pledge property in 1999 and 2000, but declined by 16 percent in 2001 as the market settled (and a banking crisis affected a number of lenders). Since then there has been rapid growth (38 percent in 2002 and 48 percent in 2003) as the economy improved and people made use of their property to invest. Most mortgages are in urban areas, and land-based agricultural mortgages accounted for only about one fifth of all registered mortgages in 2003, but it is quite common to mortgage urban properties to raise funds to invest in farms. The Ararat valley remains the prime area for land-based mortgages in agricultural areas. Lending rates now range from 10 to 16 percent per annum, matching the lower end of the range anticipated in the SAR (1-3 percent per month) and far below the rates of 40 percent and more that prevailed when the project commenced. While interest rates are certainly not determined by the project, it has successfully played its part as one of the factors that affected the changes. Property prices have been monitored since 2000, but data were too inconsistent until 2002 to draw any conclusions. Apartment prices in Yerevan and elsewhere are reported to be three or four times higher today than they were three or four years ago. Currently, property price trends appear to be in line with general inflation at around 8.5 percent per year (but prices for individual private residences in Yerevan are increasing by as much as 45 percent annually). The project did not have explicitly defined poverty, gender or other social objectives. However, the establishment of secure and documented rights to immovable property has provided women and the poor with important legal protection regarding their ownership rights to real estate assets. Although project implementation gained momentum after the first year, the slow start and later the need to modify implementation plans to ensure effective complementarity with assistance provided by other donors and to address issues emerging only during implementation eventually necessitated extending the closing date. A first 12-months extension was agreed upon in late 2002 in order to complete the agreed work program, including a number of new activities designed to improve service efficiency, transparency and client responsiveness. In retrospect, this extension was essential to permit the implementation of critical activities, not foreseen during appraisal, that elevated this project from a moderately successful technical operation to a highly successful one with a very strong client orientation and focus on efficient service provision. A second extension became necessary in late 2003 because continually adverse weather conditions prevented the completion of one remaining major contract: the acquisition of up-to-date satellite imagery needed to facilitate mapping of areas where ground surveying is not feasible or not cost-effective; the project will close as soon as this contract is completed. With secure property rights firmly established, almost all properties surveyed, about half of them registered and the remainder likely to be registered by early 2005, the real estate market growing vigorously, and mortgaging becoming an increasingly popular means to obtain financing, the project's achievement of its development objectives is rated substantial. - 5 - 4.2 Outputs by components: 4.2.1 Establishment of the IRC Network The project, very successfully, established a nation-wide network of Information and Registration Centers. As against 25 envisaged in the SAR, a total of 47 IRCs, spread throughout the entire country and supported by the Central Information Center, have been established and are fully functioning; cost-efficient implementation plus financial support from the EU Food Security Program and technical assistance from USAID helped to facilitate this expanded system coverage. All staff are fully trained, and all offices are equipped and operating effectively. Service standards have been greatly improved during the later years of project implementation, with client satisfaction rising commensurately. Response times to client requests have been sharply reduced. Most normal registration transactions are now completed within one day -- far better than the one-week target specified in the SAR. In response to supervision mission findings, nine IRCs were reconfigured to improve internal workflows and efficiency and to eliminate opportunities for unobserved staff interaction with clients (and hence for unofficial financial transactions). Complaint boxes were installed and a client complaint hotline number was prominently displayed in all IRCs, so as to provide opportunities for customer feedback. A number of staff found to have taken illegal payments or otherwise abused their position were dismissed, and client complaints have declined substantially in the case of these nine IRCs. Based on this positive experience, the SCRPC is now planning to renovate all other IRCs along the same lines. The central Information Office (IO) has also been established and operates well. All data collected during field work are checked and recorded in the IO before being sent back to the IRCs for subsequent work. The IO is the central back-up depository for all the information at the IRCs, providing a safeguard in case of fire or other destruction at any IRC. Cadastral registration data management at the IO is fully computerized, and specific software and TA were furnished by USAID. Full automation of the registration system was not envisaged at the time of appraisal, and at present the system is still largely paper-based. It works well, but is slow by international standards where automation is becoming the norm. This led to the agreement between the SCRPC and IDA to use Credit funds (freed by the substitution of TA from USAID and SIDA for IDA funds) for the development of a fully automated registration system. The development software suitable for everyday IRC operations was initiated towards the end of the project period; operational testing has been going on, and it is expected that the automated system will be implemented in the IRCs in the course of 2004. While the focus of project design was on the technical, staffing, management and operational aspects of establishing a fully functioning cadaster system, it became evident during the course of implementation that client satisfaction was an aspect that needed special attention as well -- especially if the underlying objective of promoting the development of an active real estate market was to be achieved. Fee levels and quality of service were found to be of particular relevance. Initially, the fees charged to users were high because the SCRPC was passing on to them many of the one-time costs of system improvement -- such as the substantial labor costs incurred in carrying out the initial inventory work, cadastral valuation, preparing cadastre files and data entry and digitizing survey maps as well as the cost of materials needed to prepare cadastre files and certificates. Since the project funded only the temporary staff needed to check the systematic registration work, the SCRPC set its fees high enough to cover all expenditures not covered by the Credit. Treating one-time costs as recurrent expenditure and setting the fees each year high enough to cover them deterred many potential system users and was a significant impediment to market development. As an outcome of the mid-term review in 2001, it was agreed that the Credit would fund the cost of essential materials. This, combined with the findings of subsequent customer satisfaction surveys - 6 - and mission reviews of IRC procedures, persuaded the SCRPC to reduce its fees by 50 percent or more and to introduce drastically shortened turn-around times for all client services. The impact of these measures is evident in the significant growth since then of client transactions at IRCs and in significantly improved customer satisfaction. Further cost reductions and improvements in customer service could be achieved by additional improvements in office workflows and procedures, but the grant-funded TA supplied by USAID and SIDA has, to date, had only limited impact in this respect (SIDA will continue to provide TA until 2006). Overstaffing, and the costs associated with it, remains a matter to be addressed. The SCRPC currently employs large numbers of staff (by international comparison), in part to undertake the inventory work needed to establish the full cadastral register and in part as a relic of the past. Once the systematic registration work is completed, staff levels will considerably exceed the requirements for running even the paper-based system now in place. The impending shift to an automated registration system will further reduce staffing needs. The SCRPC will reduce staff by 20 percent later in 2004 or in 2005 when all systematic work, cadastral filing and data entry are completed, and it intends to implement a further 20 percent cut some time later. The dictates of financial self-sustainability may necessitate yet further reductions over time, but maintaining staff morale is also an essential consideration for SCRPC management. SCRPC management is fully cognizant of the issues involved. A longer-term cost recovery strategy and business plan have been prepared and are under review, and the SCRPC can be expected to deal with these issues effectively. Should the SCRPC, as is under consideration, be entrusted by Government with also establishing and running the register for motor vehicles, staffing patterns would obviously need to be reconsidered. As a result of the activities implemented under this project component, a country-wide and efficiently operating network of IRCs has been established, fully capable of providing secure registration and cadastre services. The outcome of this component is rated substantial. 4.2.2 Surveying and Cadastral Mapping This component was to establish and equip a mapping center and to undertake the survey and mapping works required for systematic registration. Of the estimated 2.5 million property units in the country, 830,000 were to be surveyed and titled, in both urban and rural areas. During the course of implementation, the EU Food Security Program (EU-FSP) agreed to provide funding for surveying and titling about 1.1 million rural parcels, and it was agreed that the TRP would shift resources to cover more urban sites instead. The overall project target of 830,000 titles registered was retained. USAID provided additional support to cover an estimated 102,000 parcels. By the time the project closed, it had in fact surveyed 994,000 properties, and those remaining will be completed with EU-FSP funds during 2004. While the survey work accomplished exceeded the SAR targets by almost 20 percent, difficulties were encountered in titling and registration. Assessing/establishing the legal status of properties and recording them in the cadastral database was more difficult than had been anticipated. Since the cadastral records are also needed for tax assessment purposes, the SCRPC surveyed the floor plans of each property, recorded various other building data, and checked whether the required construction permits had been obtained. This required considerable time and effort and greatly delayed the completion of cadastral records. By the end of March 2004, when this component closed, cadastre records had been completed for only 584,000 units and only 413,700 title certificates had been issued. This is the only specific physical output target of the Project that has not been achieved. The SCRPC will, however, complete the remainder of this work during 2004. - 7 - Table 2: Survey Targets and Achievements Survey Type 1999 2000 2001 2002 2003 Total Actual as % of SAR Complete villages ­ SAR target 80 80 80 96 0 336 ­ actual 24 64 69 0 0 157 46.73 /b Village updates ­ SAR target 20 20 20 20 0 80 ­ actual 8 20 14 38 0 80 100.00 Urban full (sq km) ­ SAR target /a 10 7.5 7.5 5 0 30 ­ actual 7.0 13.6 66.4 31.0 112.2 230.2 767.33 Urban minimal (sq km) ­ SAR target 30 36 36 48 0 150 ­ actual 21.8 44.7 135.6 127.9 133.0 463.0 308.67 /a Yerevan. /b Work taken over by EU Food Security Program. A major achievement of the project is, thus, the almost full cadastre inventory of real estate properties for the entire country. With the support of the project, along with that of the EU-FSP and a small early contribution from USAID, almost every property in the country has now been surveyed. Only a few tens of thousands remain to be completed in 2004, using EU-FSP funds. Already 1.136 million records have been entered in the central database, and the remaining records are expected to be entered during 2004 and early 2005. This database has already provided the information required for a more equitable land and property tax, and the steep increase in property tax revenue of about 63 percent in 2003 over the level of 2002 is largely due to this achievement. A major problem not foreseen at appraisal was that about 320,000 properties can only be registered and titled once various documentation problems (missing permits, illegal construction or modification, encroachment on neighboring parcels or public land, etc.) are resolved that were only uncovered during the systematic survey. A law has been enacted to deal with these problems, but there has been reluctance so far by property owners to "regularize" their problems, probably due to the cost of doing so (an average of US$265 per property in Yerevan and US$156 elsewhere) and the obligation to pay property taxes once it is done. The government deadline for regularizing illegal constructions and encroachments is February 2005, and owners are expected to come forward in greater numbers as this deadline approaches. Applications received so far tend to be for the more valuable properties, and owners of higher-value properties will probably apply before the deadline in February 2005. But 51,000 of the illegally constructed properties in Yerevan are garages, and it remains to be seen how many owners of such lower-value properties will apply (so far only 2,000 have applied). Once these irregularities are resolved, the land administration framework will be in good order and these defaulters will have been brought into the tax base. At the rates established for property regularization, if half the properties that should be regularized go through the process, the government will receive in excess of US$30 million in fees and the annual property tax revenue will increase by over US$1 million per year. The SAR also did not envisage, and made no explicit provision to pay for, the enormous quantity of file covers, paper, certificates, blank forms, etc., needed for registering 830,000 properties. To meet this pressing need IDA subsequently agreed to use cost savings realized on surveying contracts to help cover the procurement of these critical items. Similarly, some funding was provided to improve public awareness by printing and distributing information leaflets about the cadastre system. Two special and important survey works were undertaken to address issues not envisaged at appraisal. The first was to survey and establish accurate administrative community boundaries in two - 8 - marzes (194 communities); this became necessary because maps derived from the individual community surveys frequently led to discrepancies (overlaps or gaps) in the boundaries between them. The second was to reassess the land categories in four marzes (375 communities), where land classification and land use had changed since the last update several decades ago; this particularly affected people paying taxes on land as if it were irrigated when it no longer is. The SCRPC is now carrying out similar work in the remaining marzes using its own funds. After approval by the Land Management Institute (LMI) and ratification by Government, the LMI will match the cadastre maps to the community boundaries, correcting overlaps, filling in gaps and creating a uniform series of maps linked by a common geodetic framework. IRCs and local governments will be provided with the land inventory data so that appropriate land management arrangements can be made and revised tax lists prepared. An important project objective was to promote the development of private sector capacity in surveying. Survey works were competitively tendered, and 100 different companies carried out the work under 358 separate contracts, well managed by the SCRPC mapping center and the PIU. It is a very notable project achievement that a highly competitive and professionally competent private surveying industry was so successfully promoted. An added positive effect was to lower the unit costs of surveying well below the levels envisaged in the SAR (see Annex 8, Attachment 2), generating cost savings that allowed project funds to be shifted to activities not initially foreseen. In support of the core survey and mapping activities, the project was also to provide modern technological inputs, notably improvements in the geodetic network, access to satellite imagery and aerial photography, orthophoto mapping, and photogrammetric processing of imagery. Much of this attracted grant funding from other donors, necessitating considerable coordination efforts. SIDA (Swede Survey) took on the work to improve the geodetic network, and this has been done very successfully. Work continues, and a national geodetic framework meeting international standards is in place and may soon be connected to the EUREF framework connecting most European countries. Agreement on the scope of aerial photography and satellite imagery needed for base mapping proved somewhat difficult to reach, in view of rapid technological advances in this field, utility and cost considerations, and concerns raised by the national security agencies. Switzerland eventually provided aerial photography images for Yerevan and parts of the Ararat Valley, along with a photogrammetric workstation, training and technical assistance to process the images. IDA funded a second photogrammetric workstation as well the acquisition of satellite imagery for regions where aerial photos or ground surveys were either not possible or not needed. The equipment has been delivered and training successfully provided. About half of the satellite imagery ordered remains to be delivered, due to unsuitable weather conditions for satellite fly-overs during the second half of 2003 and the first five months of 2004, and is expected to be delivered before the end of June 2004. All the digitizing, processing and mapping equipment is in use, and map production is underway based on state-of-the-art technology. This project component successfully achieved its objectives of carrying out the substantial surveying and mapping required for systematic registration, fostering the development of a competitive private surveying industry, and establishing up-to-date map production capacity in the mapping center. Where the component fell somewhat short of SAR targets or expectations, it was either because problems (e.g., illegally constructed or modified buildings, national security considerations concerning aerial photography) had not been anticipated or because of less than effective utilization of technical assistance which, in turn, was in part caused by the difficulties involved in coordinating TA provided by different donors. Overall, the output for this component is rated substantial. - 9 - 4.2.3 Project Implementation Unit The PIU, with very close supervision from SCRPC management, effectively coordinated all project activities and managed project finances and the procurement process, although agreed timetables and deadlines were not always adhered to. Credit funds were disbursed and used in full accordance with IDA guidelines and procedures, and audited accounts have been maintained satisfactorily. Working closely with the Monitoring & Evaluation Department of the SCRPC, project implementation and progress towards achieving the development objectives were effectively monitored. Essential information on indicators such as the number of different transactions in the real restate market, property prices, and trends in market activity is regularly collected and reported and made available on the SCRPC web site which is linked to, and supported by, most of the country's major realtors. The M&E activities -- information collection, analysis, reporting, and presentation -- are of very high quality and better than seen in any other similar projects in the region. The study on a longer-term cost recovery strategy and business plan for the SCRPC, intended to be carried out in the first project year, took unusually long to contract and to complete, but was finally delivered in March 2004. The SCRPC will now need to consider critical issues identified in this study, including the cost implications of replacing obsolete equipment and software, finding markets for potential income-generating activities (such as the sale of maps and services), implementing the automated registration system, and bringing staffing in line with the reduced needs of an established registration and cadastre service. The output for this component is rated substantial. 4.3 Net Present Value/Economic rate of return: As the SAR noted, a detailed economic analysis to determine an ERR would be very difficult and has not been attempted. Basic data suggest, however, that the cost-recovery periods of 7 years for urban and 15 years for rural properties noted in the SAR are easily bested. The primary beneficiaries are the property owners, who obtain secure property rights and also realize significant savings on transactions costs associated with registering real estate transactions. Indeed, the main immediately quantifiable benefit is the reduction of the time needed to register a real estate transaction from typically two weeks to only one day. A conservative estimate of the benefit of transactions being executed today in one day is about US$25 per transaction. With more than 70,000 transactions registered by the SCRPC in 2003, the aggregate imputed benefit from speedy transaction amounted to about US$1.75 million. As the volume of registered transactions continues to grow, this annual benefit will increase rapidly as well. 4.4 Financial rate of return: No financial rate of return estimation was made. The project will, however, generate substantial income flows to various parts of government and easily pay for the investments made and the recurrent costs of operating the system. A project investment of US$9.65 million is expected to generate, at the present fee and tax rates: Ø anestimatedadditionalUS$30millioninone-timefeestoGovernmentforregularizingillegal constructions and encroachments, and Ø annuallyadditional: l property tax revenues of US$3 million. l property transaction duties of US$200,000. l property transaction fees of US$1 million to the SCRPC. l property tax revenues of US$1.5 million following the regularization of illegal properties. - 10 - 4.5 Institutional development impact: The project has successfully established an efficient and reliable cadastre and title registration system for immovable properties, a modern map production capability, and a highly competitive and professionally operating private surveying industry. It also has successfully put in place the modern operational parameters for the real estate market and laid the institutional base for secure property ownership, transfer, mortgaging and effective and equitable taxation. The associated legal framework has also been established, based on work done during project preparation (funded by a Japanese PHRD grant) and with USAID assistance. This institutional framework eliminates the need for title insurance, and the associated costs for property owners, and for fees to lawyers who elsewhere handle property transactions. An important institutional development issue successfully addressed by the project was that of introducing and firmly institutionalizing client orientation in a public sector agency that has turned itself into a service provider with clearly established service standards and with easily used client feedback mechanisms in place. This was accompanied by the equally important initiation of a determined anti-corruption policy within the SCRPC which, if recent interviews with clients are an indication, appears to be effective. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: A large number of property units surveyed lack adequate documentation, have been built or modified illegally, lack permits for building or modifications done since Independence, or encroach upon neighboring properties or the right-of-way of utility companies. Problems of this scale (over 320,000 cases) were not envisaged during project preparation. This caused significant additional work for the SCRPC, delays in registrations, and a shortfall from SAR targets in total properties registered and titled (although the targets for properties to be surveyed and mapped were considerably exceeded). Legislation simplifying the procedures for regularizing illegal constructions and land encroachments has been enacted, and the owners of such properties are slowly beginning to utilize the mechanism provided to regularize their properties. 5.2 Factors generally subject to government control: Government placed very high priority on this project. All requisite laws and regulations were enacted expeditiously, and budgetary provisions to the SCRPC were adequate. The provision of counterpart funds was occasionally delayed, but the SCRPC was always able to cover its obligations by temporarily using its own resources derived from registration and other user fees. 5.3 Factors generally subject to implementing agency control: SCRPC management took very close interest in the implementation of the project, responding rapidly to any issues that arose. Recommendations on improving technical or procedural aspects of SCRPC operations were carefully scrutinized and, if agreed to, implemented with conviction and dedication. Suggestions concerning the concept of "one-stop" IRCs, reconfiguration of offices to improve workflows and eliminate opportunities for staff to negotiate illegal fees with clients, reduce turn-around time on transactions, lower fees, and engage in a public information campaign were all accepted and effectively implemented. - 11 - 5.4 Costs and financing: At appraisal, total project cost over four years was estimated at US$10.57 million, to be financed by an IDA Credit of US$8.0 million equivalent (SDR 6 million) and US$2.57 million from GOA. Actual project cost over 5 years is expected to be US$9.65 million, of which US$7.85 million will be from the IDA Credit and US$1.81 million from GOA and the SCRPC (see Annex 2). Only US$0.04 million of the Credit are expected to remain undisbursed. At the request of Government, IDA agreed in 2002 to continue financing operating expenses at 40 percent for the remainder of the project implementation period, rather than to lower it to 20 percent as originally postulated; this explains the lower Government contribution to total project financing. Some reallocation among expenditure categories was necessary during implementation, partly due to other donors providing grant assistance for TA (making the use of IDA funds unnecessary), partly because of changes in costs of individual activities (surveying costs dropped significantly during implementation), and partly to accommodate needs not foreseen at appraisal (e.g., printing of documents and forms). 6. Sustainability 6.1 Rationale for sustainability rating: Sustainability of the project is highly likely. The user fees collected by the SCRPC cover the cost of IRC operations and maintenance. The system's financial viability will further improve as the volume of transactions continues to increase (annual increases of about 20% are likely for the foreseeable future), while staff costs are reduced once the initial systematic registration effort with its heavy workload is completed. In the near term, some budgetary support from Government (or donor funding) is still needed for the central facilities of the SCRPC, particularly for replacing obsolete equipment, but even these costs should soon be covered from SCRPC's direct revenues -- even if fees continue to be reduced over time. The technical and operational aspects of the cadastral information and registration functions and the mapping facility are of high standard. Administrative and technical capacity throughout the entire system is high, there is a pronounced esprit-de-corps within the service, and the determined and successful efforts made in recent years to develop a client-oriented, reliable and high-quality service bode well for continually growing user acceptance. The SCRPC has made good use of external assistance provided by different donors and is expected to continue to benefit from topical support in several specific areas such as system automation, electronic archiving, a computerized property valuation system, and further strengthening of its mapping capacity. SIDA (SwedeSurvey) and USAID remain engaged, including in the areas of system automation, property appraisal and property taxation. 6.2 Transition arrangement to regular operations: The transition to regular operations has been smooth, mainly because the project was never regarded as an activity distinct from the SCRPC's overall operations. Indeed, from its inception the project was seen and treated by SCRPC management as a mainstream effort to develop the SCRPC into an effective cadastral agency. Top management took charge of project implementation, with the PIU focusing primarily on ensuring that IDA requirements concerning financial management, procurement, contracting and progress reporting were fully adhered to. SCRPC procedures and operations evolved and became institutionalized as the project progressed, and there is no need for arranging a transition from project - 12 - implementation to regular operations. The procurement, contract administration and financial management functions of the PIU were largely project-specific, and the capacity to manage these tasks in future for activities funded by sources other than IDA exists within the SCRPC. At the technical/operational level, the main transitional issue will be the shift from the heavy focus on systematic registration and the one-time effort needed to establish the national title registration system to the client-driven modus operandi of dealing with sporadic registration of market transactions. The institutional capability for this is in place, and the growing volume of such activities handled by the IRCs in the past few years suggests that this will be easily accomplished. 7. Bank and Borrower Performance Bank 7.1 Lending: The project was consistent with the priorities of GOA and the Bank's CAS, both of which had a strong focus on private sector development. Armenia had taken a number of important steps towards the creation of private property, including the enactment in January 1991 of the "Law on peasant cooperative farms" and the distribution of land as private property to more than 320,000 farmers. In anticipation of the end of the five-year moratorium on the sale of land in 1996, GOA in December 1995 enacted the "Law on the Real Property." In 1997 it established a property registration system, based on the decree on the "Establishment of the State Cadastre System." The project was, thus, well timed to support the Government's efforts. The close cooperation with the GOA and the State Cadastre Administration (SCA, later reconstituted as the SCRPC), as also with a USAID-funded pilot project, ensured a high degree of local ownership and a solid understanding of the issues to be addressed and the existing institutional and regulatory preconditions. A PHRD grant was effectively utilized to prepare the project and, simultaneously, to build initial capacity within the SCA. Somewhat surprisingly then, modifications to the implementation plan became necessary once the project became effective so as to take into account the parallel implementation of the EU-FSP program in rural surveying and registration and the USAID program of TA for title registration and property markets. Given the active presence of both programs in the country during the period of project preparation and appraisal and the collaboration during this time with both these donors, this should have been avoidable. As it was, the first survey contracts under the project were only issued in November 1999. The fact that until late in the preparation process the project had been planned as merely one component of a larger multi-sectoral operation may explain that technical design aspects did not receive as much attention as they might have during the preparation of a free-standing title registration project. Several issues that arose in the course of implementation might have been anticipated during preparation -- e.g, the need to print large quantities of blank forms and certificates, the importance of office design for workflow efficiency and minimizing opportunities for illegal staff conduct, or the widespread practice of building or modifying structures without permits. When these concerns became evident during supervision missions, appropriate responses had to be devised and agreed upon between the SCRPC and IDA. However, none of these were critical concerns at the start of the project when the overriding priorities were to establish the basic institutional infrastructure and initiate the program of field surveys. Despite these shortcomings, Bank performance during identification, preparation and appraisal is rated satisfactory. - 13 - 7.2 Supervision: Supervision was carried out regularly, and mission findings and recommendations were actively followed up. Mission staffing could have been stronger during the initial project years: between October 1997 and November 2001, only one mission (in March 2000) included a title registration, survey or cadastre specialist. While some technical expertise was available to the SCRPC through the TA programs funded by other donors, including some of the same consultants previously employed by the Bank, the Bank was in an increasingly weak position to assess technical aspects of project implementation. Following the mid-term review all subsequent supervision missions included one (and in one case two) technical experts. The resulting increased attention paid to project implementation, in addition to project management and administration, proved beneficial. The SCRPC increasingly looked to IDA for advice and suggestions to improve its operational efficiency, technical competence and client orientation and for lessons to be learned from other countries. A client survey undertaken by the November 2001 mission was instrumental in convincing SCRPC management of the need to pay attention to service quality and client needs, to acknowledge the presence of dishonest officials in the service, and to take appropriate action. The findings of field supervision during the October 2002 mission brought issues of survey quality to the attention of the SCRPC and led to more rigorous quality control of work done by private contractors. As implementation proceeded, modifications to the work programs and cost estimates developed during appraisal became necessary, including in response to other donors stepping in to finance portions of the SCRPC's overall development and work program. IDA responded flexibly to these changing circumstance by reallocating Credit resources as needed to newly emerging priorities and to fulfill effectively the role of lender of last resort. Bank supervision performance is rated satisfactory. 7.3 Overall Bank performance: The Bank's overall performance is rated satisfactory. Borrower 7.4 Preparation: The authorities provided competent and experienced counterparts for the Bank's preparation team who contributed vigorously and effectively to the preparation and developed strongly collegial relationships with the Bank's team and the other donors involved. Legal and regulatory issues identified during preparation were effectively taken up and appropriate laws enacted (notably the Law on State Registration of Property Titles in April 1999) and measures taken to establish the necessary environment for effective project implementation. Borrower performance during preparation is rated satisfactory. 7.5 Government implementation performance: On the whole, Government performance was supportive and effective, notwithstanding some problems. Project effectiveness was delayed by about four months due to lengthy procedural requirements prior to signing and ratification, and counterpart funding was provided only with some delays during the - 14 - first two project years, forcing the SCRPC to pre-finance activities from its own resources. National budget approval and execution rules and procedures occasionally delayed implementation of measures identified after the annual budget had been approved by Parliament and had to await financial authorization for the following year. These issues aside, Government provided sustained financial and policy support throughout project implementation. Government implementation performance is rated satisfactory. 7.6 Implementing Agency: The autonomous State Committee on the Real Property Cadastre (SCRPC), created in 1999 out of the State Cadastre Administration (SCA) under the Ministry of Justice, provided strong and dedicated oversight and management throughout. When issues arose or were identified by supervision missions, they were readily considered and, if warranted, addressed decisively. Initial problems of inadequate coordination among the three main project offices -- the PIU, the Mapping Center and the Central Information Office -- were resolved as soon as the Bank's project launching mission noted this issue. SCRPC management was highly attentive to all aspects of implementation, responded effectively to Bank recommendations, and proactively resolved identified problems before they could become serious impediments. Notable, too, was the pronounced desire to learn from best practices in similar projects elsewhere. The only matters that took excessively long were the installation of financial management software in the PIU (until 2002 records were kept in basic Excel spreadsheets) and the formulation of a cost recovery strategy. SCRPC implementation performance is rated highly satisfactory. 7.7 Overall Borrower performance: The Borrower's overall performance is rated satisfactory. 8. Lessons Learned (a) The project benefited from being implemented by a single agency which enjoyed very strong leadership. Mission recommendations, once considered and agreed to, were implemented without the need to navigate through inter-agency rivalries and to balance conflicting vested interests. This is in marked contrast to problems experienced in countries with dual systems (e.g., Bulgaria, Romania, Croatia.). Strong and committed leadership is an essential precondition for successful project implementation, as is evident as well in other successful cadastre projects in the region (e.g., Kyrgyzstan, Slovenia, Moldova). (b) Learning from similar efforts in other countries can be a powerful force for improvement at home. At first certain that there was little to learn from others, SCRPC leadership later pushed hard for information from other registration projects so as to gauge its own progress and achievements by international yardsticks. (c) Automation is not a necessary precondition for providing effective service such as a one-stop window or one-day turn-around on routine client services. Indeed, aggressively moving towards client-friendly service is more essential for increasing system efficiency and user acceptance than is the transition to a fully computerized environment. - 15 - (d) Problems and deficiencies can be effectively addressed if they are correctly identified and well documented, and if the Bank is firm in pointing out the need for correction and at the same time provides feasible recommendations for doing so. The SCRPC did not receive mission reports on poor service quality and staff corruption with pleasure, but once persuaded of the veracity of these reports took decisive remedial action and, in the end, felt pride in having dealt with these problems. (e) Institutional inertia can be overcome by strong leadership. Inherited bureaucratic practices and procedures with long tradition initially impeded the transformation of the SCRPC from a governmental administration to a client-oriented service agency. Persuaded by Bank missions and recognizing the need for change, SCRPC leadership identified a number of specific and well-targeted actions in key areas and made sure these were implemented. Reducing turn-around time on most service transactions to only one day (even with a paper-based system) was a drastic departure from past practice and a change that greatly improved the public image of the service. (f) A systematic cadastre is necessary for an effective and equitable property tax administration. The transition economies experienced a spate of uncontrolled and often unrecorded real estate development, led by a rapidly emerging entrepreneurial class, and only a systematic cadastre can effectively capture this for inclusion in the property tax base and eliminate widespread tax evasion. (g) Proactively involving the private sector through competitive contracting, as was done here with the surveying work, can generate substantial efficiency gains and cost savings. Key is transparent contract management, preferably initiated during a pilot phase. (h) Technical expertise in Bank supervision teams is essential if the Borrower is reluctant to utilize credit funds for TA, has limited knowledge of best practices elsewhere, and/or is utilizing grant-funded TA from a bilateral source where the interests of the TA provider may diverge from those of the recipient. Borrowers appreciate conceptual requirements (e.g., "zero tolerance for corruption") translated into practical recommendations (e.g., open counters and clear fee schedules, no unobserved client access to staff, sealed complaint boxes, public posting of complaint phone numbers, quick response times, etc.). Periodic supervision by technical experts with intimate understanding of the project's history and objectives often meet the Borrower's need for advice on next steps and a second opinion on commercially supplied TA. (i) Property valuation can be undertaken within the titling and registration institution, provided the latter is not the property-tax collecting agency as well. A valuation department can function well within the titling and registration authority and does not have to be within the MOF (see also lesson (d) in the ICR for the Thailand Land Titling III Project, March 2003), but the tax should not be determined or collected by the titling and registration authority. In Armenia, the SCRPC is entrusted with the valuation of a property, but the property tax rates are set and the taxes are collected by the municipalities or communities. The SCRPC benefits only if there is a transaction which has to be recorded. - 16 - 9. Partner Comments (a) Borrower/implementing agency: (i) Ministry of Finance 18.06.2004 To the Chairman of the State Committee of Real Property Cadastre of the Government of the Republic of Armenia Mr. Manuk Vardanyan Dear Mr. Manuk Vardanyan, We would like to inform you that we have no remarks and recommendations on the final report of the "Title Registration" credit project implementation, which was submitted by the director of "Title Registration" credit project with a letter N PIU-113 on May 25, 2004. As for the estimates of the financial reimbursement mentioned mainly in the 4.4 point of the project some clarifications will be needed from the viewpoint of the methodology of their calculations and forecasts. At the same time we would like to inform that the end of the WB "Title Registration" credit project on the satellite imagery activities was prolonged up to September 30, 2004. For that purpose in the State budget 109 020.5 thousand drams were anticipated on the account of credit means, as well as 5.893.0 thousand drams for the audit implementation of the project. Best regards, M. Mikayelyan (ii) State Committee on the Real Property Cadastre (SCRPC) First of all we would like to thank the World Bank for its support and express gratitude to the WB staff and experts. Particularly, we would like to note Mr. Mark Lundell's input in the beginning of the project and Mr. Gotz Schreiber's support for project implementation and effective completion. At the same time we thank Mr. Adlington, G. Minasyan and all those individuals and companies for professional support provided. Summing up the analysis of the current situation of the SCRPC in Armenia the following conclusions can be drawn: · Successful institutional system. Although the Armenian cadastral system is only 7 years, the necessary legislative field is already established and this has already regulated the civil circulation of property rights. The system has been established by grounding on the foreign experience taking into account the local peculiarities. UNECE guidelines' provisions are the basis of the system. In particular, a rather successful structure of the system was selected which is a committee on a superior level of the public administration with its 47 local offices and 7 specialized institutions all over Armenia. The system involves fiscal, legal and physical cadastres. The selected structure, - 17 - particularly, has the following advantages: The real property state unified cadastre system of RA allows: · to implement a unified registration of ownership, use and other property rights, · to implement title registration both in urban and rural areas, and to have a unified register for the parcels, buildings and constructions. · to use 1 mapping material for legal and fiscal cadastres, which is the most money-consuming process. · to exclude data collection duplications. · to centralise the information on real property physical and qualitative data, their rights and restrictions, mapping materials and other types of information in one system. · to use the collected information for legal, registration, valuation and other cadastres conduction. · to separate the responsibilities of the cadastre system and other state and community management bodies in the field of land administration. The real property cadastre system of Armenia has been highly valued also by different international organisations. Particularly, the system was admitted by UNECE WPLA as a model, and the Armenian experience was taken as an example for investigation and installation the system in the transition countries. The existing tremendous progress of the system is greatly related to the highly qualified management. In particular, the management of the committee has a clear picture of the selected strategy and a political willingness to accomplish commenced reforms. Modernization of the real property cadastre system. Reforms for the modern cadastre system installation have been implemented, particularly, for the installation of the real property systematic registration and commencement of the automatization process, etc. For this purpose the cadastre system has received credit and grant assistance from different international organisations. Particularly, after examining the process of such projects implementation it is noticeable that there are serious results. In particular, the following can be mentioned about the achievements of the main projects, that are WB Credit project and EC Food Security Program. · The mapping activities implementation of the systematic registration has been given to the private surveying companies which are selected through the tender. It has resulted in decrease of cadastral mapping costs for one real property unit. Particularly, if the mapping value for 1 sq. km in urban areas had been anticipated 17000 USD, and in the result of competence 4000 dollars. The mapping costs in rural areas also have been reduced for 2-3 times. In the result of the prices decrease the economized means were directed to the mapping of the additional territories and installation of the modern registration system. So, if beforehand it was anticipated to do mapping for only 60% of real property, and then the economized means enabled to reach 100%. · Due to the fact that the surveying activities in Armenia are to be licensed by SCC, there are many private surveying companies with necessary equipment and highly qualified specialists acting in Armenia. · The majority of the financial means anticipated for the consulting services of the WB have been directed to other categories because the consulting services were taken by the other grant projects and the WB financial funds were used more efficiently. Particularly, these means were directed to the repairing activities in the local offices, procurement of the modern technologies and geodetic and mapping modern equipment, implementation of satellite survey activities and so on. Actually this means that one of the main results of the project is the efficient cooperation with other donor - 18 - organisations implementing other cadastral projects in Armenia. Meanwhile, taking into account the great volumes of the anticipated activities in the SCC, we think that new joint projects implementation with many international organizations is of great importance. Highly estimating the serious progress, however, we think that it is necessary to mention some problems which will be solved in the near future. · The computerized system of the registration is not developed and installed yet. This essentially decreases the efficiency of cadastre system activities, at the same time not giving opportunity to reduce the fees for the sporadic registration. · Now the cooperation with users is not on a sufficient level. In the last 1-2 years there is a serious progress in the system. Currently there are boxes of complaints and recommendations in the local offices, trust phone numbers, etc. · The fact that real property unified market valuation system for taxation does not yet exist, impedes the system efficient activities. There are a great number of illegal buildings and land encroachments. However, having an efficient legislative field, sustainable institutional system and qualified specialists, the SCC efficiently fights against different negative aspects characteristic for the transitional countries, such as corruption. In particular, based on the study of the current situation and taking into account already implemented activities, we can notice that the objectives anticipated by this plan of activities were quite realistic and will be realized in the coming years. (b) Cofinanciers: n.a. (c) Other partners (NGOs/private sector): None received. - 19 - 10. Additional Information Volume of Market Transactions 1998-2003 50,000 45,000 40,000 4,908 35,000 3,323 6,220 30,000 6,406 2,401 Transactions 25,000 of 6,302 20,000 1,752 72 2,878 645 2,874 15,000 1,055 32,074 27,126 Number10,000 17,950 16,787 15,762 18,479 5,000 0 1998 1999 2000 2001 2002 2003 Alienation Leasehold Mortage Market Transactions: Yerevan versus Rural Areas 50,000 45,000 40,000 35,000 23,148 30,000 19,187 v Transactions 25,000 of 20,000 5.41% -2.46% 66.46% 14,247 34.67% 20.64% 8,775 Number 15,000 8,325 8,559 10,000 20,054 17,668 12,935 5,000 11,449 11,535 11,132 0.75% -3.49% 16.20% 36.59% 13.50% 0 1998 1999 2000 2001 2002 2003 Yerevan Rural Areas - 20 - Efficiency of the Land and Real Estate Market (registered transactions as % of total properties) 7.00 6.45 6.00 5.18 5.00 4.16 4.00 % 3.34 3.00 2.68 2.15 2.00 1.73 1.47 1.09 1.00 0.79 0.81 0.79 - 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Real Property Alienations 1998-2003 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003 Armenia Yerevan - 21 - Land Transactions 1999-2003 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1999 2000 2001 2002 2003 Lands Agricultural Land Annual Percentage Change in Housing Prices in Yerevan, 1999-2003 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% 1999 2000 2001 2002 2003 Apartments Houses - 22 - Annex 1. Key Performance Indicators/Log Frame Matrix Actual as % of Outcomes and Outputs SAR Actual SAR target Outcome: Securing property rights through the establishment Done of a network of Information and Registration Centers (IRCs), providing a unified register for land parcels and buildings Outcome: Increasing the efficiency of property markets Volume of market transactions 19,774 43,202 218% Alienation 17,950 32,074 179% Leases 72 6,220 8639% Mortgages 1,752 4,908 280% Registered transactions as a percentage of total properties 0.79 1.73 219% Average lending rates from Banks 40% & up 10 to 16% Output: IRC Network Establishment Response time for ongoing registration (in days) 7 1 14.30% Creation of fully functional IRCs 25 47 188% Training of staff and managers in new procedures 200 200 100% Establishment of a central information center 1 1 100% Data entry of titles (in thousands) 740 1,136 154% Public awareness program 0 1 Output: Surveying and Cadastral Mapping Coverage of Surveying and Cadastral Maps Rural - number of complete village surveys 336 157 47% - number of village surveys updated 80 80 100% (Note: EU-FSP funded rural surveys, leading to 100% coverage by 2004) Community boundary survey and correction 0 194 .. Irrigated lands' inventory surveys 0 375 .. Urban - full coverage (square km) 30 230 767% - minimal coverage (square km) 150 463 309% (Note: Urban coverage is also 100 percent complete in 2004) Number of properties surveyed and mapped (in thousands) 830 995 120% Number of properties registered (in thousands) 830 414 50% Satellite imagery (square km) 2,400 2,400 100% (Note: To be completed by July 2004 when weather conditions permit) Mapping Center with trained personnel 1 1 100% Building private sector survey capacity - number of firms contracted 100 - 23 - Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million Information & Registration Center (IRC) Network 2.92 3.52 120.7 Surveying and Cadastral Mapping 6.12 5.48 89.5 Project Implementation Unit 0.60 0.67 111.8 Total Baseline Cost 9.64 9.67 Physical Contingencies 0.93 Total Project Costs 10.57 9.67 Total Financing Required 10.57 9.67 Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 2. Goods 0.49 0.00 0.13 0.00 0.62 (0.46) (0.00) (0.12) (0.00) (0.58) 3. Services 0.00 6.16 0.23 0.00 6.39 Technical Services (0.00) (5.54) (0.20) (0.00) (5.74) 4. Consultancies, TA, 0.00 0.00 0.87 0.00 0.87 training (0.00) (0.00) (0.87) (0.00) (0.87) 5. Operating Costs 0.00 0.00 1.44 1.27 2.71 (0.00) (0.00) (0.81) (0.00) (0.81) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 0.49 6.16 2.67 1.27 10.59 (0.46) (5.54) (2.00) (0.00) (8.00) - 24 - Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 0.00 0.09 0.02 0.00 0.11 (0.00) (0.08) (0.02) (0.00) (0.10) 2. Goods 0.86 0.00 0.18 0.00 1.04 (0.86) (0.00) (0.18) (0.00) (1.04) 3. Services 1.20 4.74 0.22 0.00 6.16 Technical Services (1.20) (4.27) (0.20) (0.00) (5.67) 4. Consultancies, TA, 0.00 0.00 0.66 0.00 0.66 training (0.00) (0.00) (0.66) (0.00) (0.66) 5. Operating Costs 0.18 0.00 0.39 1.13 1.70 (0.11) (0.00) (0.26) (0.00) (0.37) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 2.24 4.83 1.47 1.13 9.67 (2.17) (4.35) (1.32) (0.00) (7.84) 1/Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF. Information & Registration 1.32 1.60 2.18 1.35 165.2 84.4 Center (IRC) Network Surveying and Cadastral 5.38 0.74 4.99 0.48 92.8 64.9 Mapping Project Implementation 0.60 0.00 0.67 0.00 111.7 0.0 Unit Unallocated 0.70 0.23 0.0 0.0 Total 8.00 2.57 7.84 1.83 98.0 71.2 Note: SDR 6 million was about US$8 million at appraisal, but SDR/US$ exchange rate changes during implementation left only US$0.04 million undisbursed. - 25 - Annex 3. Economic Costs and Benefits Project beneficiaries are property owners, intermediaries involved in real estate transactions (e.g., banks and real estate agents) and both local and national governments. The benefits to the private parties derive in two ways: (i) at the time of receipt and recording of the property title, when the property right is secured and legally confirmed; this provides legal security and "peace of mind" and is useful for future transactions, but generates no immediate financial benefit; (ii) during and after a transaction when the transactions costs are greatly reduced. State and local governments and the SCRPC benefit through (i) increased revenues from property taxes (to local governments), (ii) state taxes on registered real estate transactions, (iii) SCRPC fees on transactions, and (iv) one-time fees for the regularization of illegally constructed or modified properties. A titling fee could have been charged, but systematic registration was done without charge to the property owners (the fees currently charged for sporadic registration average US$12 for a property inventory and US$9 for a boundary survey). Benefits to local or state governments are, of course, transfers from the private sector and do not represent a true benefit to society ­ unless taxes collected on real estate are collected more efficiently (at lower cost) and are possibly more equitable than other taxes. The benefits of a "secured" right are difficult to quantify. With respect to the possession of a property title this is sometimes attempted through calculations of farm output, investments and/or borrowing for properties vis-à-vis untitled properties. Alternatively, estimates are made of changes in property values attributable to the security of title which presumably capture the benefits of improved asset allocation within society through property sales (those who can use the properties most efficiently obtain ownership). However, in a transition economy such as Armenia changes such as growth in output and investments or property value increases cannot be easily attributed to the titling effort alone. A more easily calculated benefit to property owners is the reduced cost of obtaining property title as a result of the project. The project did not charge property owners for systematic registration, but sporadic registration (i.e., at the owner's request) is subject to a fee. With 994,000 properties surveyed under the project and 414,000 of them titled, an average reduction in the cost of obtaining title of US$15 per parcel, as realized under the project, implies that the 414,000 newly-titled property owners would have benefited by saving an aggregate amount of US$6.2 million ­ had they been required to pay. Once the rest of the 994,000 properties surveyed but not yet titled are processed, their owners would have benefited by an additional US$8.8 million in reduced registration expenses. Taken together, these amounts considerably exceed the US$9.67 million project outlay. Another possibly significant benefit that is similarly difficult to compute is the gain from allocative efficiency of leasing or renting real estate ­ i.e., the benefit of property being leased or rented out, without risk of losing ownership, to a more efficient user. While SCRPC data show an 86-fold increase in registered lease transactions, this was from an extremely small base, and certainly excludes the significant leasing that has been taking place without formal registration in the SCRPC registers. No comparable records are available for renting. Lower real interest rates may be attributed, at least in part, to the reduced lenders' risks on mortgages when real estate titles are secured through title registration. Interest rates for collateralized loans have declined from more than 40% p.a. at the time of appraisal to a range of 10-16% p.a. at present. The major driving forces behind this have, however, been the overall strengthening and stabilization of the national economy and the growth in the banking sector generally, rather than the growing use of real estate - 26 - as collateral. The main benefit to society that can be quantified with a reasonable degree of reliability is the reduction of the time needed to register a real estate transaction from typically two weeks to only one day. Average per capita income is around US$800, but the time value of those engaging in real estate transactions may be significantly higher. With at least two parties involved in any transaction, a conservative estimate of the benefit of transactions being executed today in one day is about US$25 per transaction (using average per capita income). In 2003, more than 70,000 transactions were registered by the SCRPC, giving an aggregate imputed benefit from speedy transaction of about US$1.75 million. With continuing rapid growth in registered transactions, this annual benefit is going to increase rapidly as well. An important, though unquantified, benefit directly associated with the drastic reduction in processing time (and with other measures taken in the project), is the sharply reduced opportunity for IRC staff negotiating unofficial payments from clients. The project has also significantly helped to improve tax equity. Nearly all properties are now recorded (or about to be recorded) in the cadastre, and it is now easy to for any local government to identify properties that are not yet included in the property tax registers. Moreover, cadastral registration coverage is far more complete for properties valued above the taxable level of AMD 3 million (about US$6,000). Municipalities and rural communities are therefore now in a position to tax all property owners, including those who have evaded this responsibility in the past by avoiding registration. The substantial increases in real estate tax revenue in the recent past have been largely due to increased collection from wealthier segments of society in urban areas who had successfully escaped taxation prior to the project. Tax collection compliance has greatly increased since local governments were given responsibility for assessment and collection. Financial Costs and Benefits: The benefits to the various parts of the Government are presented separately because they are transfers from one part of society to another. These benefits are vast in comparison to project costs. An investment of US$9.67 million is expected to provide: Ø anestimatedadditionalUS$30millioninfeestoGovernmentforregularizingillegalconstructions and encroachments; and Ø annuallyadditional: · property tax revenues of US$3 million. · property transaction duties of US$200,000. · property transaction fees of US$1 million to the SCRPC. · property tax revenues of US$1.5 million following the regularization of illegal properties. Regularization of Illegal Properties. About 140,000 properties in Yerevan and about 180,000 elsewhere have buildings erected or extended illegally or encroaching on neighboring land or utility rights-of-way. These have all been recorded during the survey work and are to be "regularized" by February 2005. Multiplying the number of these properties with the average fee for regularization gives a total of about US$65 million in one-time fee income to Government. However, with about half of these illegally constructed buildings being of low value (garages, sheds, etc.), it is more realistic to assume that many will not be regularized at all and the rest will be done for less than the typical fee for a major structure. Nevertheless, income from regularization fees should certainly amount to US$30 million or more. - 27 - Since regularized properties will also be added to the tax base, this will over time generate additional property tax revenue of about US$1.5 million per year (assuming an average tax rate and that only half of the current irregular properties will eventually be taxed). Additional Property Taxes. Increases in property tax collections were high between 1997 and 1999 when the Armenian Dram was less stable, but from 2000 to 2002 averaged about 8.5 percent per annum. The increase in 2003 was very high, at 63 percent, primarily due to the addition to the tax rolls of all properties introduced into the cadastre (and of better collection efforts by the local governments). Discounting for the "normal" rate of increase of 8.5 percent recorded in the previous years, the extra tax revenue generated as a result of the project (and of better collection) in 2003 was on the order of US$3 million. This includes the additional taxes paid by those owning high-value properties added to the tax base that had previously avoided payment. With more properties now included in the tax base, tax equity has greatly improved and future tax rate increases needed for communities to cover their expenses will not have to be as high as they would with only partial coverage. Transaction Duties and Fees. State duties and registration fees to the SCRPC are paid on each transaction and today average about US$15 per transaction. Although SCRPC fees have been reduced by about 50 percent during project implementation, the rapid growth in registered transactions has resulted in considerable revenue growth. Income from state duties increased by 37 percent in 2002 and 19 percent in 2003, adding US$274,000 more to the GOA budget in 2002 than in 2001 and a further net increase of US$191,000 in 2003. SCRPC income similarly increased as a result of the project, rising by 12 percent in 2001, 31 percent in 2002 and 8 percent in 2003 (despite the 50% reduction in registration fees). Annual SCRPC revenue from transactions registrations (including sporadic titling) is now over US$1 million. - 28 - Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 02/1996 4 TEAM LEADER (1); S S TITLE REG. SPECIALIST(1); AG. INSTITUTIONS SPEC. (1); SURVEY & TITLING SPEC. (1) 06/1996 4 TEAM LEADER (1); S S TITLE REG. SPECIALIST(1); AGRO-INDUSTRIAL SPECIALIST (1); AG. INSTITUTIONS SPEC. (1) 09/1996 3 TEAM LEADER (1); S S AG SPECIALIST(1); AGRO-INDUSTRIAL SPECIALIST (1) 03/1997 2 TEAM LEADER (1); S S AG. INSTITUTIONS SPEC. (1) 06/1997 4 TEAM LEADER (1); S S TITLE REG. SPECIALIST(1); AG. INSTITUTIONS SPEC. (1); FINANCE SPEC. (1) 10/1997 3 TEAM LEADER (1); S S TITLE REG. SPECIALIST(2) Appraisal/Negotiation 12/1997 2 TEAM LEADER (1); S S CONSULTANT (1) 04/1998 2 TEAM LEADER (1); S S CONSULTANT (1) Supervision 08/04/1999 3 TEAM LEADER (1); S S FINANCIAL ANALYST (1); DISBURSEMENT ANALYST (1) 03/31/2000 3 TTL, AG ECONOMIST (1); S S LAND TITLE SPECIALIST (1); OPERATIONS OFFICER (1) 09/30/2000 3 TTL, SR. AG ECONOMIST (1); S S OPERATIONS OFFICER (1); PROCUREMENT ANALYST (1) 05/12/2001 5 TTL, LEAD ECONOMIST (1); S S OPERATIONS OFFICER (1); PROCUREMENT SPECIALIST (1); FINANCIAL MANAGEMENT SPECIALIST (1) - 29 - 11/23/2001 5 TTL, LEAD ECONOMIST (1); S S OPERATIONS OFFICER (2); SURVEY & TITLING SPEC. (1); JPA (1) 07/25/2002 6 TTL, PAS (1); OPERATIONS S S OFFICER (1); JPA (1); PROCUREMENT SPECIALIST (1); FMS (1); LAND REGISTRATION SPEC (1) 12/23/2002 6 TTL, PAS (1); OPERATIONS S S OFFICER (1); JPA (1); TITLE REG. SPECIALIST (1); SURVEYING SPECIALIST (1); PS (1) 04/16/2003 5 TTL (1); OPERATIONS S S OFFICER (1); CONSULTANT (1); PROCUREENT SPECIALIST (1); JPA (1) 10/14/2003 5 TASK TEAM LEADER (1); S S OPERATIONS OFFICER (1); TITLE REG. SPECIALIST (1); PROCUREMENT SPECIALIST (1); JPA (1) ICR 03/14/2004 2 TITLE REG. SPECIALIST S HS (1); ECONOMIST(1) (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation 8.2 Bank Budget 19.4 Appraisal/Negotiation 9.2 Bank Budget 15.7 Supervision 83.1 Bank Budget 274.8 ; FAO 16.7; TFs 33.5 ICR 6.0 Bank Budget 40.0 Total 106.5 Bank Budget 349.9 ; FAO 16.7; TFs 33.5; Overall total 400.1 - 30 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 31 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 32 - Annex 7. List of Supporting Documents l Staff Appraisal Report, September 16, 1998 (Report No. 17985-AM) l Agreed Minutes of Negotiations, August 27, 1998 l President's Report, September 16, 1998 (Report No P-7261-AM) l Development Credit Agreement, December 23, 1998 (Amended October 4, 2002) l "An overview of Armenia's Reforms: Housing and Urban Development Policy", USAID / ICMA, 1989-1995 l "Commentary on the Status of the System for the Registration of Real Estate Rights in the Republic of Armenia", World Bank Trip Report, Justin T. Holl, Jr., October 26, 1997 l "Summary Report on Real Property Registration, The Republic of Armenia", ICMA and Martson & Martson, March 15, 1997 l Quarterly Project Management Reports (PIU) l Supervision Mission Aide Memoires and PSRs - 33 - Additional Annex 8. Borrower's Completion Report Report On the Activity of the "Title Registration" Credit Project The agreement on Development Credit No 3135 AM "Title Registration" signed between the Republic of Armenia and International Development Association specified USD 10,569.5 thousand for 1999-2003, of which USD 8,000.0 thousand is the share of the World Bank, USD 1,400.9 thousand is the share of the State Budget and USD 1,658.6 is the share of the State Committee of Real Property Cadastre. SDR 6,000.0 thousand was anticipated by "Title Registration" Credit Agreement, according to dollar rate in 1999 it was USD 8,000.0 thousand, but due to dollar rate changes, during the WB mission in October, 2003, SDR 6,000.0 thousand was already USD 7,884.0 thousand. 7 categories were specified by the Development Credit Agreement N3135 AM "Title Registration": 1- Technical services, 2-Goods, 3- Consulting Services, 4-Operating costs of IRCs, 5- Operating costs of the PIU, 6- Works, 7- Unallocated. The deadline of the completion of the works specified by Points 2,3,4,5 and 6 was December 31, 2003, and only for Satellite Imagery Works the deadline is September 30, 2004. As of 31.12.2003 the implemented works within the frames of the project are USD 9,538.1 thousand, of which USD 7,702.7 thousand is the share of the Credit, USD 706.5 thousand - the share of RA budget, USD 1,128.9 thousand -the share of State Cadastre Committee. The Project implementation process by categories is as follows: First Category- Technical Services USD 6,266.3 was specified by Credit Agreement for implementation of the works anticipated by the technical services category, of which USD 5,675.9 thousand is the share of the Credit, and USD 590.4 thousand - the share of the State Budget. As of 31.12.03 invoices comprising USD 6,026.0 thousand were submitted of which USD 5,537.4 is the share of the Credit and USD 488.6 thousand - the share of the State Budget. The following works were implemented by the first category (see Attachment 1): 1. Mapping works- SAR envisioned USD 4,631.2 thousand for this part, as of 31.12.03 the implemented works comprise USD 4,736.4 thousand of which USD 4,262.7 is the share of the Credit and USD 473.7 thousand is the share of the Budget. Penalty of USD 60.7 thousand was imposed on the mapping companies for delays. The mapping works without penalty amount to USD 4675.7 thousand, by the share of the Credit (90%) - USD 4,208.1 thousand. As a result of National Competitive Bidding for mapping works' implementation 306 contracts were signed, 26 in 1999, 61 in 2000, 102 in 2001, 80 in 2002 and 37 in 2003. The volumes of mapping works noticeably increased as compared to those envisioned in the SAR and as a result of which the quantity of units exceed 830.0 thousand units envisioned in the SAR. The actual units total to 994.5 thousand. As of 31.12.03 the following works were carried out: Mapping works in 230.24 sq. km area of Yerevan instead of 30 sq. km envisioned in the SAR and 463.03 sq. km. area in other towns of RA instead of 150 sq. km envisioned in the SAR and mapping works of 237 rural communities instead of 416 specified by the SAR. The volumes increased due to reduction of units' - 34 - prices planned in the beginning of the project (Attachment 2). Since mapping works of rural communities were mainly implemented in the framework of EU "Food Security Program", thus, cadastral mapping in urban areas was implemented by the World Bank Project. In the framework of the Project boundary survey, correction and description works in 194 communities of Ararat and Armavir marzes and irrigated lands' inventory in 375 communities of Aragatsotn, Kotayk, Armavir and Ararat marzes were also implemented, 23 contracts were signed for those works. Thus, "Title Registration" Credit Project of the WB included Yerevan and 10 marzes of RA, i.e. 294 communities including 12 communities in Yerevan, 45- in other towns of RA, 237- in rural communities. The works in the framework of Title Registration Credit Project were carried out in 46 local offices, including 7 in Yerevan, 39 in RA marzes. The PIU has signed 329 contracts with 100 licensed companies for mapping works' implementation. The comparative table of volumes and prices of anticipated and actually implemented mapping works according to years is presented in Attachment 2. In the frames of Title Registration Project 994.5 thousand units were mapped, 783 thousand were surveyed and cadastral cases were prepared towards 570 thousand units and in the frames of first state registration 407 thousand units were registered and title certificates were issued to their owners. The one continuing weakness of the project is the long lag between the survey work, registration and issuance of the title certificates. The primary reason for the delay is the time-consuming process of checking the legal documents and matching it with the physical situation. Over 350,000 cases are known to be problematic because the documentation is not in order (existence of illegal constructions, etc.). Problems of this scale were not envisioned in the SAR and all registration works were impossible to complete prior December 2003. To overcome the obstacles occurring title registration process the State Cadastre Committee developed a new Land Code, assisted in the preparation of the law on regularizing illegal constructions which was accepted by National Assembly. The adopted laws, as well as other normative acts simplified title registration procedure and the title registration is activating now. 2. Satellite Imagery Works- The SAR envisioned USD 150.0 thousand for the mentioned works. However, considering the need of the accuracy of imagery for cadastral system the issue of necessary amounts was discussed during the WB mission in May, 2001, as a result USD 300.0 thousand was defined for Satellite Imagery works instead of USD 150.0 thousand as specified by the SAR. For this purpose International Competitive Bidding was carried out in 2003 and as a result a contract to the amount of USD 305,000.0 was signed with GAF AG, Germany. The proposal of the mentioned company was the lowest- 365.0 thousand. During negotiations the USD 365.0 thousand was reduced to 305.0 thousand. In the framework of the project satellite imagery of 2400 sq. km. area of RA and training must have been implemented. The training specified by the Satellite Imagery Contract should have been the completion of the one of Swiss Project and be focused on training on creation of maps from satellite images. In accordance with the contract the specified works should have been completed on December 18, 2003. However, it was impossible to complete the contract in defined time period and the main reason was unfavorable weather conditions. The fact of non-completion of the contract in specified terms was recorded in Aid Memoire of the WB mission in October and it was purposed to extend the works up to June 30, 2004. The Ministry of Economy and Finance sent a letter to the WB requesting to extend this category and on December 23, 2003 the official no objection of the WB was received. In 2003 invoices to the amount of USD 120.0 thousand were submitted for satellite imagery works and USD 185.0 thousand is specified in the Budget for 2004. 3. Printing Services- These works were not specified by the SAR in the beginning of the project and the WB pointed out its importance and it was anticipated during the WB mission in 2001. In the framework of - 35 - the "Title Registration Project" on purpose to provide the local offices of the SCC with necessary materials for first sate registration, 2 international tenders for the printing services were conducted in 2001 and 2002. In the framework of the contract signed in 2001 the local offices were provided with more then 1 million materials necessary for the cadastral cases (folders, blanks, registries, etc) and according to the contract signed in 2002 about 800.0 thousand Title Certificates were obtained and given to the Local Offices. In 2003, 100000 Title Certificates(for automated registration), mortgage certificates, lease certificates and different blanks were obtained. The total cost of printing services for 2001-2003 is USD 981.9 thousand. 4. Geodetic Equipment Service- Service of geodetic equipments (total stations, GPS, Disto measuring device) to the amount of USD 37.8 thousand was implemented (SAR specified USD 42.9 thousand). 5. Service of Equipment- USD 490.0 thousand was specified by the First component for current service costs for equipment (computers, printers, etc.) by the share of the credit, but as the computers and other equipment obtained were in warranty period, so during the WB mission in 2001 the expenses foreseen for these works were directed to the implementation of other activities, particularly to printing service. 6. Cadastre Automated System Development- The works had not been specified by the first component in the beginning of the project and were anticipated during the project extension by the project for 2003, total USD 149.9 thousand, comprising USD 134.9 thousand - the share of the credit and USD 14.9 - the share of the budget. These works set up a base for cadastre system automation and it will contribute to Geo-informational system creation. Second Category- Procurement In the beginning of the project USD 533.0 was specified for the works anticipated by this category by the share of the Credit, but in 2003 a change was made in the Credit Agreement (reallocation among categories was done) and USD 1070.2 was specified by this category. This comprises USD 1,042.1 thousand -the share of the credit and USD 28.1 - the share of the budget. As of 31.12.03 invoices totaling to USD 1,039.4 were submitted by the second category, of which USD 1,038.9 was the share of the Credit and USD 0.5 thousand - the share of the Budget. The following works were implemented by the second category: 1. According to SAR, from the start of the project up to 2001 it was anticipated to furnish and equip 11 Local offices. This was completely implemented and, besides, different hardware (computers, printers, scanners, etc.) and software were obtained for 30 Local offices and the Information Center. Thus, in the framework of "Title Registration Project", office and archival equipment to the amount of USD 868.1 thousand were obtained for the SCC Local offices and Information Center. The table of furniture, software and hardware obtained in the framework of the project is submitted in Annex 4. 2. Four vehicle to the amount of USD 12.2 thousand were obtained for the PIU for coordinating mapping and first state registration works. 3. Since other donor companies carry out aerial photography for SCC and in the framework of the Title Registration Credit Project Satellite Imagery works have been anticipated and currently are in process, thus, it was important to procure photogrammetric workstation which will make possible to have the final results of the survey works. In 2003 a contract to the amount of USD 159.2 thousand was signed for Photogrammetric Workstation procurement. The works specified by the contract are completed. - 36 - Third Category - Consulting Services USD 688.0 thousand was anticipated by this category (100% credit funds) which included: 1. training and consultation, 2. PIU staff salary and payments for operating services. As of 31.12.03 invoices totaling USD 664.2 were submitted by the second category. The following works were implemented by the third category: 1. Training and consultation- In 2001 national shopping was carried out for system administrators' training and a contract to the amount of USD 69.9 thousand was signed for 2001 and 2002. The main purpose of the training carried out in the framework of the project was the training of specialists in ALR, ARPAK software for installation of the title registration automated system. Within the frames of this contract specialists of other fields of cadastre were re-trained. During the WB mission in 2002 the WB mentioned the importance Cost Recovery Strategy activities. For this purpose quality based tender was carried out. DHV was recognized as winner, the proposal of which was USD 100.0 thousand. As a result of negotiations with the winner a contract to the amount of USD 65.5 thousand was signed. In 2003 one more contract to the amount of USD 14.8 thousand was signed for training in the frames of which training of system administrators was carried out. The works for training and consultancy totaling USD 149.1 thousand comprised of USD 84.7 thousand for training and USD 64.4 thousand for international consultancy. 2. PIU staff salary and payment for operating services - The works implemented in this direction total to USD 515.1 thousand. In the frames of the project on purpose to create informational bank of cadastre not only digitizing operators, but also archiving operators were included. Forth Category- Operating Costs of the IRCs and Information Center USD 905.5 was anticipated by this category, of which USD 226.0 thousand is the share of the credit and USD 659.5 thousand is the share of the state budget. The main purpose of this expenditure was to provide the current expenses of the local offices and information center (utility, offices equipment, fuel, etc.). As of 31.12.03 the works covered by the forth category are USD 429.2 thousand, of which USD 223.3 thousand is the share of the credit and USD 205.9 thousand is the share of the State budget. The participation of the SCC was implemented by this direction, i.e. it provided salary to local offices and information center. The counterpart funding percentage was the highest and in compliance with the agreement counterpart percentage was increasing by the years, particularly in 1999 -75% of expenditures- the WB financing , 25% of expenditure - the Budget financing, in 2000 60% - the WB and 40% - the budget, 2001- 40% - the WB, 60% - Budget, in 2002 20% -the WB and 80%- Budget was anticipated, but a change was made in the Credit Agreement and the WB 40% and Budget 60% was approved, during the project extension in 2003 the WB 20% and Budget 80% was anticipated. In the framework of the project undisbursed funds of the state budget were mainly in this category which was conditioned by the high percentage of counterpart funding in disbursements. - 37 - Fifth category PIU's - Operating Costs In the beginning of the project USD 68.0 thousand was anticipated by this category including audit costs as well. Thus, for each year USD 17.0 thousand was specified and the audit fee was USD 10.0 to 12.0 thousand. In 2003 a change was made in the Agreement and USD 147.0 thousand was specified for expenditures by this category. Works implemented by the fifth category total USD 135.4 thousand as of 31.12.03. In the frames of the category expect of PIU's operating costs, printing of booklets and public awareness activities were also covered. The main purpose of these activities was to provide information on Cadastre System activities to the public. USD 10.0 thousand was specified for 2004 for audit of 2003. Sixth Category- Works /renovation works of the IRCs In the beginning of the project such category was not envisioned in the Agreement. During the WB mission in 2002 the WB and the SCC pointed out the importance of the works specified by this category, i.e. renovation works of the IRCs. The main objective of the activities was to set up the principal of "one window", i.e. the citizen for each question applies to only one employee and receives the answer from the same window. On purpose to implement these activities a change was made in the Agreement and a new category called "Works" was added. In 2002 the PIU signed a contract with architect-designer for developing design estimates. Design estimates for renovation activities of 20 local offices were developed. The WB anticipated USD 100.0 for carrying out these activities of which USD 90.0 thousand was the share of the WB and USD 10.0 the share of the State Budget. These activities were specified by the Project for 2003. The amount specified by the WB covered only modernization activities of 9 IRCs. During the renovation range of unspecified activities occurred, as a result the WB increased the amount specified by 15% and it comprised USD 115.0 thousand. As of 31.12.03 invoices to the amount of USD 114.9 thousand were submitted of which USD 103.4 thousand was the share of the credit and USD 11.5 thousand the share of the state budget. The renovation works of all 9 IRCs are completed. Seventh Category - Unallocated USD 702.0 thousand was unallocated by the Agreement in the beginning of the project. However, during the WB mission in 2003 the WB and the SCC discussed the works implemented and being implemented in the framework of the project and in accordance with defined activities the unallocated funds were reallocated among appropriate categories. After the reallocation in the Agreement was made, no unallocated funds remained. Thus, all works envisioned in the SAR are completed. Moreover, new categories had been added and works of bigger volumes than it was anticipated were implemented by some categories. On the whole, the PIU fulfilled its task by 97%. The summary sheet of the anticipated and implemented works is submitted in the Attachment 3. TRPIU March 13, 2004 - 38 - Attachment 1 Comparative table of works anticipated and implemented by the first category of the SAR Works Works Actual anticipated by anticipated by implemented Name SAR ($) the contract ($) works ($) Notes 1 2 3 4 5 The difference between the third and the forth depends on the increase of acutally mapped and planned volumes. Penalty of USD 60741 was Mapping works 4,631,189.00 3,608,350.00 4,262,738.26 imposed on mapping companies. 150000$ is added by the WB for the satellite imagery specified by the SAR. The works have been extended up to June 30, 2004 and USD Satellite Imagery Works 150,000.00 305,000.00 120,000.00 185000 has been specified for 2004. During the WB missions in May of 2001 and October, 2003 was pointed out the importance of the issue to provide the IRCs with the necessary Printing Services - 981,876.44 981,876.44 materials for registration Geodetic Equipment Service 42,880.00 41,800.00 37,812.50 These works were not implemented since the equipments were in the warranty period and were Servicing of Equipment 490,000.00 - - used for the other works These works were not specified by the SAR in the beginning of the project since it was Development of automated anticipated to implement it in 2003, during the system of cadastre - 134,960.00 134,960.00 project extension All activities, except of Satellite Imagery, anticipated by this category are completed. The deadline of Satellite Imagery Works is extended Total first category 5,314,069.00 5,071,986.44 5,537,387.20 up to September 30. * The submitted expenses include only Credit amounts. - 39 - Attachment 2 Comparative table of the volumes and costs of mapping works specified by the SAR and implemented as of 31.12.03 Works Actually Unit price Average actual Works specified Actually anticipated implemented specified by the unit unit price by the Contract implemented by the SAR works SAR ($) ($) ($) works ($) Notes 1999 Mapping works of Yerevan 10 square km 7 sq. km 1sq. km-17000$ 12,750.00 448,582.50 414,938.7826 contracts were Other towns 30 square km 21.80 sq. km 1sq. km-9000$ 6,100.00 signed. Penalties of $5236.63 were Rural communities 100 villages 32 villages - 1unit-5.56$ 1unit-5.15$ imposed on the 40334 units companies. 2000 Mapping works of Yerevan 7.5 sq. km 13.65 sq. km 1sq. km-17000$ 12,600.00 993,623.31 1,161,026.8861 contracts were Other towns 36 sq. km 44.67 sq. km 1sq. km-9000$ 5,935.00 signed. Penalties of $20495.81 were Rural communities 100 villages 84 villages - 1unit-5.56$ 5.20 imposed on the 162321 units companies. 2001 Mapping works of Yerevan 7.5 sq. km 66.44 sq. km 1sq. km-17000$ 6,750.00 1,183,166.10 1,393,057.48102 contracts were Other towns 36 sq. km 135.64 sq. km 1sq. km-9000$ 5,370.00 signed. Penalties of $20717.99 were Rural communities 100 villages 83 villages - 1unit-5.56$ 4.44 imposed on the 81728 units companies. 2002 Mapping works of Yerevan 5 sq. km 37.11 sq. km 1sq. km-17000$ 4,000.00 741,108.60 917,613.3680+23 contracts were Other towns 48 sq. km 159.070 sq. km 1sq. km-9000$ 4,000.00 signed. Penalties of $13627.23 were Rural communities 116 villages 38 villages - 1unit-5.56$ 4.44 imposed on the 27419 units companies. 2003 Mapping works of Yerevan Project 106.04 sq. km 2,800.00 241,869.47 376,101.76 Extension 37 contracts were Other towns Project 101.86 sq. km 2,750.00 signed. Penalties of Extension $663.49 were imposed on the companies. Total from 1999 to 2003 Mapping works of Yerevan 30 sq. km 230.24 sq. km 1sq. km-17000$ 7,780.00 3,608,349.98 4,262,738.26 Other towns 150 sq. km 463.03 sq. km 1sq. km-9000$ 4,831.00 Rural communities 416 villages 237 villages - 1unit-5.56$ 4.81 311802 units * The submitted expenses include only Credit amounts. - 40 - Attachment 3 Works implemented and envisioned in the SAR by categories Expenditures Works anticipated anticipated by the the SAR in the categories after the Actually beginning of the change in the Credit implemented Name project ($) Agreement works Notes 1 2 3 4 5 1. Technical services 5,314,069.00 5,675,890.00 5,537,387.20 1.1 Mapping works 4,631,189.00 4,262,738.26 329 contracts were signed. Penalty of 60741.15 USD was imposed on the companies 1.2 Satellite Imagery Works 150,000.00 120,000.00 This direction was extended up to September 30, 2004 and USD 185000 was specified by the Budget 1.3 Printing Services 0.00 981,876.44 The works were not anticipated in the beginning of the Project, but the WB and the SCC pointed out the importance of providing IRCs with materials for first state registration. 1.4Geodetic Equipment 42,880.00 37,812.50 Service 1.5 Service of Equipment 490,000.00 The obtained equipment were in warranty period and the expenses were directed to the implementation of other activities 1.6 Development of automated 0.00 134,960.00 system of cadastre The works were not anticipated in the beginning of the project, but were anticipated during the project extension in 2003. 2.Works 533,000.00 1,042,110.00 1,038,898.50 3.Consulting Services 790,000.00 688,000.00 664,221.21 3.1Training and Consultation 393,000.00 149,136.24 3.2 PIU staff salary and 397,000.00 515,084.97 payment of operating services 4.IRC operating costs 593,000.00 226,000.00 223,320.95 5.PIU operating costs 68,000.00 147,000.00 135,444.44 In 2004 audit to the amount of 10000$ should be carried out . 6.Works 0.00 105,000.00 103,399.27 7.Unallocated 702,000.00 0.00 0.00 Total 8,000,069.00 7,884,000.00 7,702,671.57 * The submitted expenses include only Credit amounts. - 41 - Attachment 4 Equipment and furniture obtained in the framework of Title Registration Project Credit Name Quantity Amount $ Archive furniture 1. File cabinet 11 1590 2. Archive for keeping mapps 75 15135 3. Cupboard / having special protection 11 4440 4. Archive cupboard for keeping documents 135 23040 Total 44205 Office Furniture 1. Director's desk 11 986 2. Tables 11 530 3. Desk 165 12225 4. Computer table 44 1564 5. Chair 175 2925 6. File cabinet 11 760 7. Bookcase 77 6552 Total- Office Furniture 25542 Total -Furniture 69747 Computer Equipment Computers 94 157645 Monitor 60 26888 UPS 91 20891 Laser printer 35 121409 Scanner 29 64254 Printer 11 28104 Other equipments 190701 Total Equipments 609892 Software 16 140475 Software Licenses 10 47950 Total 868064 - 42 - Attachment 5 Report of Project Implementation Process Up to 30 April 2004 USD Expected expenditure for the whole project Actual expemditure from the begining of the project Project Components & Expenditure Categories of which: of which: the the Budget from system Budget from system financing financing State Property State Property Subtotal Credit RA financing Financing Real cadastre Subtotal Credit RA financing Financing Real cadastre I: IRC Network 2,919,000 1,317,000 536,006 1,065,994 3,510,934 2,174,375 207,698 1,128,861 of which: a/ Technical services 980,954 980,954 0 0 b/ Equipment and goods 867,555 867,037 517 0 c/ Training 0 0 0 0 d/ Operating costs 1,549,020 223,206 196,952 1,128,861 e/ Works 113,406 103,178 10,228 0 II: Surveying and Mapping 6,120,964 5,382,000 738,964 0 5,224,503 4,755,548 468,955 0 of which: a1/ Technical services 4,856,164 4,387,209 468,955 0 a2/ Technical services/Satellite imagery 60,000 60,000 0 0 b/ Equipment and goods 159,203 159,203 0 0 c/ Training 149,136 149,136 0 0 d/ Operating costs 0 0 0 0 III: PIU 602,000 599,000 3,000 0 664,285 664,285 0 0 including a/ Technical services 0 0 0 0 b/ Procurement of equipment and goods 12,150 12,150 0 0 c/ Staff costs 516,697 516,697 0 0 d/ Operating costs of the PIU 135,438 135,438 0 0 Total 10,239,464 7,884,000 1,289,470 1,065,994 9,399,721 7,594,207 676,653 1,128,861 of which: a/ Technical services 6,266,334 5,675,890 590,444 5,897,117 5,428,162 468,955 0 b/ Equipment and goods 1,070,163 1,042,110 28,053 1,038,908 1,038,390 517 0 c/ Consulting Services and Training 688,000 688,000 665,833 665,833 0 0 d/ Oper. costs of IRCs and Mapping Center 1,951,467 226,000 659,473 1,065,994 1,549,020 223,206 196,952 1,128,861 e/ Operating costs of the PIU 147,000 147,000 135,438 135,438 0 0 f/ Works 116,500 105,000 11,500 113,406 103,178 10,228 IV: Contingencies/Reserve Fund 225,536 0 122,966 102,570 0 0 0 0 Grand Total, including Contingencies/Reserve Fund 10,465,000 7,884,000 1,412,436 1,168,564 9,399,721 7,594,207 676,653 1,128,861 Outstanding Payments Audit 10,000 10,000 Satellite Imagery 245,000 245,000 Expected Final Total 9,654,721 7,849,207 676,653 1,128,861 - 43 - - 44 -