54678 PROGRESS REPORT: STATE AND PEACE-BUILDING FUND, WITH LICUS AND PCF TRUST FUNDS Operations Policy and Country Services May 17, 2010 ABBREVIATIONS AND ACRONYMS AFR Africa Region BP Bank Procedures (statement) CAR Central African Republic DRC Democratic Republic of Congo EAP East Asia and the Pacific Region ECA Eastern Europe and Central Asia Region FAO Food and Agriculture Organization FCS Fragile and conflict-affected situation FPA Fiduciary Principles Accord FY Fiscal year GBV Gender-based violence IBRD International Bank for Reconstruction and Development IDA International Development Association LCR Latin America and the Caribbean Region LICUS Low-income countries under stress MDTF Multidonor trust fund MDG Millennium Development Goal MNA Middle East and North Africa Region NGO Non-governmental organization OP Operational Policy (statement) OPCFC OPCS Fragile and Conflict-Affected States Unit OPCS Operations Policy and Country Services PCF Post-Conflict Fund SPF State- and Peace-Building Fund TF Trust fund UN United Nations UNICEF United Nations Children's Fund WB World Bank PROGRESS REPORT: STATE AND PEACE-BUILDING FUND, WITH LICUS AND PCF TRUST FUNDS CONTENTS EXECUTIVE SUMMARY .................................................................................................................. iii I. INTRODUCTION .......................................................................................................................1 II. SPF RESULTS AND PERFORMANCE STATUS ..........................................................................2 III. PCF AND LICUS TF RESULTS ..............................................................................................6 A. Post-Conflict Fund.........................................................................................................7 B. LICUS Implementation Trust Fund...............................................................................9 IV. FINANCIAL STATUS ..............................................................................................................11 V. THEMATIC APPROACHES IN FRAGILE STATES ....................................................................13 VI. FUTURE DIRECTIONS............................................................................................................16 TABLES AND BOXES Table 1. SPF Projects Approved in FY10 (Q4 FY09-Q3 FY10; US$ millions) ........................... 3 Table 2. Funds Available to Finance Projects (US$ millions, as of March 31, 2010) ................ 11 Table 3. Donor Contributions to SPF (US$ millions, as of March 31, 2010) ............................. 11 Table 4. Project Commitments and Disbursements (US$ millions) ............................................ 12 Table 5. Balance Summary for PCF and LICUS (USD Millions, as of March 31, 2010)........... 12 Box 1. Examples of Projects Supporting Youth Empowerment.................................................. 14 Box 2. Examples of Projects Supporting Community Driven Development .............................. 15 ANNEX Annex. SPF Approved Projects by Region ................................................................17 PROGRESS REPORT: STATE AND PEACE-BUILDING FUND, WITH LICUS AND PCF TRUST FUNDS EXECUTIVE SUMMARY 1. The State and Peace-Building Fund (SPF) was established in FY09 to address the needs of state and local governance and peace-building in fragile and conflict-prone and -affected situations. The SPF has superseded the Post-Conflict Fund (PCF) and the Low Income Countries under Stress (LICUS) Implementation Trust Fund, which are to be phased out by December 31, 2011. 2. Purpose of Paper. This report summarizes the status of the SPF, LICUS Trust Fund, and PCF and seeks Board approval for the third SPF installment of funding of up to $33.3 million as part of the Bank's FY11 Budget. 3. Support to Fragile States. Although still in the early stages of implementation, the SPF is emerging as an important entry point to conflict-affected countries that have had limited or no involvement with the Bank, or piloting an approach that is later scaled up with IDA funding. The SPF is also a critical source of funding for countries in nonaccrual, such as Somalia, Sudan, and Zimbabwe. Countries in nonaccrual were supported from 2004 to the present through the predecessor of the SPF, the LICUS TF. SPF financing for these countries is currently more than $17 million. The activities supported under these projects, while providing critical service delivery and technical assistance, also aim at assisting the country to move toward reengagement. 4. Performance Review. The OPCS Fragile and Conflict-Affected States Unit (OPCFC) reviewed the SPF project portfolio to strengthen the implementation of activities in the context of the Bank's fragile states agenda. The first phase of this work, completed in February 2010, identified internal and external factors contributing to delays in project implementation. The review highlights that it is unrealistic to expect high disbursement under post-conflict and fragile state conditions during the start up of multiyear projects and programs, especially when they have capacity-building objectives. Most SPF projects approved so far have been designed to meet medium-term objectives that require establishing appropriate institutional frameworks, building capacity, and providing extensive technical support from the Bank staff before service delivery. To strengthen implementation of the SPF portfolio, OPCFC is carrying out a follow-up phase, providing 12 projects with operational assistance on redesigning project implementation and addressing internal and external factors causing delays in implementation. In addition, OPCFC will give priority to providing training and technical support to task team leaders on project design, trust fund procedures, and policies relevant to implementation in fragile states (for example, OP 8.00, UN-FPA, simplified financial management procedures). 5. Portfolio Summary. The SPF Committee has approved a total of 28 projects in 18 countries for $59.2 million of which, 13 were approved in FY10 for $20 million. These projects address issues such as improved governance, institutional performance, reconstruction, and development. For example, projects include work in gender-based violence issues in Côte iv d'Ivoire and the Democratic Republic of Congo; a community-based consultative approach to service delivery in Iraq; and dynamic conflict data collection to inform regional approaches to conflict in the Philippines. The demand for SPF funds continues to be very high, and a substantial pipeline of proposals is waiting for funds to become available: 22 projects for $52 million. The projects in the pipeline include activities supporting youth in conflict; developing methods to improve aid to subnational conflicts; improving water and sanitation in conflict areas; and responding to natural disasters like the earthquake in Haiti. 6. SPF Evaluations and Learning Activities. A key element of the SPF program is to understand the impact of approaches and interventions it supports. The PCF and LICUS TF are also primary sources of learning, because most of the projects are advanced enough in implementation to enable the Bank to draw concluding lessons by country, region, or theme. The learning and application of these lessons will help to guide the strategic direction of the SPF and inform the areas of work that the SPF engages in. 7. Need for Innovative Financing. The challenge for the international community is to respond to the demand for innovative financing in FCS to (a) address the difficulties these countries are experiencing in meeting the Millennium Development Goals; (b) provide flexible support to countries emerging from conflict or turning around their performance, so as to minimize the risk that violence will recur; and (c) maintain human and institutional capacity in countries in crisis. The SPF has attracted some donor contributions and further donor support is likely, particularly when SPF matures and implementation of activities starts to produce results. Nevertheless, SPF is likely to require direct Bank support during the next few years. 8. Recommendation. Executive Directors are asked to approve the third installment of up to $33.3 million for FY11 for the State and Peace-Building Fund (SPF). PROGRESS REPORT: STATE AND PEACE-BUILDING FUND, WITH LICUS AND PCF TRUST FUNDS I. INTRODUCTION 9. This report to the Executive Directors summarizes the status of the State and Peace- Building Fund (SPF) and seeks Board approval for the third installment of funding of up to $33.3 million as part of the Bank's FY11 Budget. The SPF has superseded the Post-Conflict Fund (PCF) and the Low Income Countries under Stress (LICUS) Implementation Trust Fund, which are to be phased out by December 31, 2011. The report focuses on the SPF's allocation of funds and its performance during its start-up phase, and it describes the outcomes of a recent portfolio review and the actions that will follow from this reviews. In addition, as the portfolio includes activities financed by the PCF and LICUS TF, which share similar objectives, this report covers the status of those trust funds. The period of this report is from the beginning of Q4 FY09 to the end of Q3 FY10. 10. Background. In FY09 the SPF succeeded the PCF and LICUS TF as the Bank's primary multicountry trust fund for addressing the challenges of state fragility and conflict. OPCS manages all three trust funds jointly through similar governance structures and procedures. The PCF and LICUS TF no longer receive Bank or donor contributions and are almost fully committed. The projects under these trust funds are in their last year of implementation, and their results are providing valuable lessons for the implementation of the SPF. 11. Attention to Fragile States. The international community has been devoting increasing attention to states with weak and underperforming institutions and, more generally, to countries in fragile and conflict-affected situations (FCS). With weak institutions and conflict, FCSs face a great deal of difficulty in achieving the Millennium Development Goals (MDGs), and innovative financing is required to address this substantial gap. The SPF has become an increasingly important financing source and strategic instrument through which the World Bank and the international community provide support to FCSs. It is currently supporting innovative approaches in 18 fragile, conflict-prone, and conflict-affected countries, addressing issues such as improved governance, institutional performance, reconstruction, and development, and minimizing the recurrence of violence by promoting stability and maintaining human and institutional capacity. 12. Funding. The Board agreed, in principle, to provide $100 million for the SPF over the three-years of FY09 to FY11: three equal installments of $33.3 million would be made available annually, after the Board's approval, during the Administrative Budget discussions.1 The Board approved the first two installments, for FY09 and FY10, and this report seeks approval of the last installment of up to $33.3 million. The SPF is still in the early stages of operation, and more detailed information on the impact of projects will become available as they move forward into implementation and completion. Management expects to present to the Board, before the FY12 budget discussions, a request for an extension of the SPF and an allocation of new resources. 1 See Establishment of a State- and Peace-building Fund (R2008-0058; IDA/R2008-0056), March 25, 2008. 2 II. SPF RESULTS AND PERFORMANCE STATUS 13. The SPF's overarching goal is to address the needs of state and local governance and peace-building in fragile situations and areas that are prone to, or affected by, conflict. It has two objectives: To support measures to improve governance and institutional performance in countries emerging from, in, or at risk of sliding into, crisis or arrears. This objective focuses on strengthening, building, and rebuilding state effectiveness through institutional strengthening and economic governance interventions. To support the reconstruction and development of countries prone to, in, or emerging from conflict. This objective emphasizes post-conflict recovery, bridging the gap between humanitarian relief and development activities, addressing heightened conflict risk and growing tensions, designing more conflict-sensitive development interventions, responding to the targeted needs of vulnerable or conflict-affected populations, and deepening the knowledge base for successful intervention through research. 14. SPF Linkages with IDA. Some of the SPF's noteworthy contributions to the World Bank's work in conflict-affected situations include serving as an entry point to countries that have had limited or no involvement with the Bank, or piloting an approach that is later scaled up with IDA funding. Some examples: In Somalia, the Emergency Livestock Disease Surveillance and Control project aims to increase livestock production, enhance quality assured standards and improve the livelihoods of the pastoralist community. It is anticipated that the increased value of livestock and increased revenue from improved access to markets shall encourage pastoralists and agro-pastoralists to meet the expenses of treating their animals, after the project period. The Private Sector Revitalization project in Togo aims to improve the investment climate for Small and Medium Enterprise (SME) start-ups and stimulate their development and growth. This project plans to serve as a pilot project that will inform the design of a private sector operation scheduled for FY11. The Mining Sector Technical Assistance project in the Solomon Islands constitutes the start of an engagement strategy for the Bank in extractive industries. It is anticipated that a follow-on project proposal will be funded from IDA or SPF. 15. Grant Signing, Effectiveness, and Disbursement. Since January 2009, when the first grant agreement on an SPF project was signed, the SPF Committee has approved 28 grants, of which 22 have been signed with the recipients and 11 are effective and have commenced disbursing. While project preparation has taken time, now that the necessary institutional framework and preliminary work has been completed for these projects, it is expected that disbursements on signed grants will increase in momentum. However, delays could still be caused by such outside factors as security situations (Guinea Bissau, Thailand), seasonal changes (Zimbabwe), or internal government factors (Liberia, Nepal). 3 16. Country Status. The SPF is a critical source of funding for countries in nonaccrual, such as Somalia, Sudan, and Zimbabwe. The LICUS TF was historically the main source of Bank funding for such countries, and financing for current projects under the LICUS TF and SPF is more than $17 million. Activities supported under these projects, while providing critical service delivery and technical assistance, also aim at assisting the country to move toward reengagement. 17. Funding Approvals. Between Q4 FY 09 and Q3 FY10 the SPF committee approved 13 new grants for $20 million (see Table 1). These grants address such issues as improved governance, institutional performance, reconstruction, and development. Projects include activities in gender-based violence programs in Côte d'Ivoire and the Democratic Republic of Congo; community-based consultative approach to service delivery in Iraq; and dynamic conflict data collection to inform regional approaches to conflict in the Philippines. Table 1. SPF Projects Approved in FY10 (Q4 FY09-Q3 FY10; US$ millions) Grant Country Project title amount Côte d'Ivoire Protection from Gender-Based Violence 2,050,000 DRC Addressing Gender-Based Violence in South Kivu 1,984,787 Iraq Consultative Service Delivery Program (Phase II) 4,985,000 Lebanon Nahr el-Bared Palestinian Refugee Camp 90,000 Nepal Program to Promote the Demand of Good Governance (RE portion) 782,000 Nepal Program to Promote the Demand of Good Governance (BE portion) 2,218,000 Philippines Encouraging More Resilient Communities in Conflict-affected Areas 2,570,000 Solomon Islands Mining Sector Technical Assistance (Phase 1) 900,000 Solomon Islands Rapid Employment (BE portion) 178,750 Solomon Islands Rapid Employment (RE portion) 1,821,250 Somalia Emergency Livestock Disease Surveillance 900,000 Somalia Support to the Extended Program of Immunization (EPI) 499,990 Togo Private Sector Revitalization 1,100,000 Total 20,079,777 A. SPF Project Highlights 18. DRC: Addressing Gender Based Violence in South Kivu. This SPF grant aims to improve the provision of services that promote treatment and prevention of gender-based violence against women and girls in South Kivu. The provinces of North and South Kivu in eastern Congo are regarded as some of the cruelest conflict zones for women and girls in recent history. Tens of thousands of women and girls have been raped, sexually assaulted, attacked, and abducted. The scale and brutality of these acts of violence are unparalleled, and the effects are long-lasting and far-reaching for individual survivors, their families, and their communities. Given a culture of impunity, in which rape and assault go unpunished, combined with the already low status of women and the absence of a functioning judicial system, violence against women and girls continues with alarming frequency. The main activities under this grant are (a) the 4 provision of essential services to survivors of sexual violence, including psychosocial, health, and legal services and surgical care; (b) provision of community support to women and girls affected by conflict; and (c) advocacy for application of policies that promote the protection of women and girls and coordination between actors in responding to sexual violence. 19. Central African Republic: Safe and Reliable Public Electricity Project. The dilapidated state of the power sector in the Central African Republic (CAR) is an important impediment to economic recovery: power shortages have affected the population of the capital directly and indirectly through water shortages, a rise in crime and insecurity, and the catastrophic failure of health facilities. This grant, part of the emergency response to prevent the collapse of the power infrastructure in CAR, supplements an IDA allocation to the electricity sector through an Emergency Power Response Project (EPRP). The aim of the EPRP is to partially restore reliable electricity supply and improve the financial and operational sustainability of the sector. The SPF grant will fund emergency needs for (a) the maintenance of hydropower facilities, with emphasis on dam safety, (b) rehabilitation of the distribution network, and (c) technical assistance to improve corporate governance and performance in the power sector. As an important complement to emergency projects in an underfunded country, the grant will enable significant improvements to the safety and reliability of electricity infrastructure. 20. Guinea Bissau: Support to National Health Development Plan. The Guinea Bissau health sector, which operates in a difficult context, has suffered from years of neglect and insufficient resources. Key health indicators appear to have worsened since 2000, maternal and neonatal health indicators are among the worst in Africa, and the country is highly vulnerable to cyclical epidemic outbreaks (e.g., meningitis, cholera). The grant aims to improve the capacity of the health system to deliver basic health services in three target regions (Bafata, Gabu, and Cacheu). The primary beneficiaries of the project are health care workers and technical staff of the Ministry of Public Health (MoPH). The grant supports four key areas: (a) improving service delivery in the three regions through a better supervision system and greater accessibility of essential drugs at the primary care level; (b) improving the quality and management of human resources through support to the National School of Public Health and to the Directorate of Human Resources of the MoPH; (c) strengthening the health information system; and (d) improving the financial management of the sector. The grant contributes to the National Health Development Plan, developed in 2008 and endorsed by international stakeholders. 21. Iraq: Consultative Service Delivery Program. Following a successful 18-month pilot funded by the PCF, the SPF has provided a grant for a second stage of the program to strengthen the capacities of citizens and government to jointly develop, participate in and implement consultative service delivery programming in Iraq. The Consultative Service Delivery Initiative supports community development activities initiated by Iraqi citizens in consultation with government, with the goal of providing tangible improvement in service delivery through a long- term sustainable process of consultative development. The unique nature of the initiative lies in its structured approach to community development which combines training with learning by doing. The initiative is expected to increase citizens' faith in the effectiveness of their government, as well as government officials' confidence in engaging with citizens. The project covers 17 communities in KRG provinces only and will initiate pilots in up to 3 communities in non- KRG provinces. 5 B. Performance Status of the SPF 22. During the reporting period of this report, the OPCS Fragile and Conflict-Affected States Unit (OPCFC) reviewed the SPF project portfolio to strengthen the implementation of activities in the context of the Bank's fragile states agenda. The first phase of this work, completed in February 2010, identified internal and external factors contributing to delays in project implementation. A second phase was initiated in April 2010 to help project teams address the various factors affecting implementation that were signaled in the first phase. This section describes the review and the lessons learned from it, and then address other aspects of the SPF's performance. 23. Portfolio Review. An initial review of SPF procedures and project processing revealed the need for more extensive analysis of procedures as it became clear that a large number of SPF projects suffered from delays in the grant signing/effectiveness and pre-disbursement phase. Several problems were identified: (a) adapting project design to the implementation environment; (b) budget allocation for project preparation; (c) overemphasis on creating new capacity, rather than building on existing institutional frameworks; (d) task teams' experience with implementing projects in fragile environments; (e) staff perceptions that promotions approved by sector boards are biased toward management of complex operations; and (f) lack of early involvement of fiduciary and safeguard specialists in project design. 24. Key Issues. The review highlights that it is unrealistic to expect high disbursement under post-conflict and fragile state conditions during the start up of multiyear projects and programs, especially when they have capacity-building objectives. Most SPF projects approved so far have been designed to meet medium-term objectives that require establishing appropriate institutional frameworks, building capacity, and providing extensive technical support from the Bank staff before service delivery. Alternative mechanisms for implementation--such as the use of nongovernmental organizations (NGOs)--have not always led to quicker implementation: while these organizations have structures and staff already in place to build upon, their lack of experience in working with World Bank fiduciary procedures often leads to delays. Moreover, bypassing government structures is not necessarily consistent with the SPF's state-building objective. The portfolio review provided information that task teams can use to better design projects and that management can use to tighten the evaluation of project proposals. Similar issues affect projects financed by IDA, and the knowledge obtained from this review of the SPF portfolio will also be useful in increasing IDA's effectiveness in fragile situations. To strengthen implementation of the SPF portfolio, OPCFC is carrying out a follow-up phase, providing 12 projects with operational assistance on redesigning project implementation and addressing internal and external factors causing delays in implementation. In addition, OPCFC will give priority to providing training and technical support to task team leaders on project design, trust fund procedures, and policies relevant to implementation in fragile states (for example, OP 8.00, UN-FPA, simplified financial management procedures). 25. UN-World Bank Cooperation. As one of several initiatives related to UN-World Bank cooperation, the SPF Secretariat and the United Nations Peace-building Fund are sharing information on the projects they support. The mechanism for sharing information beyond the relevant databases will be formalized. In addition, as part of continuing efforts to address coordination, a new Bank-executed multi-donor trust fund (MDTF), the UN-WB Fragility and 6 Conflict Trust Fund will be established in late FY10. This fund is currently only funded by the Swiss Government and will primarily cover the costs of hiring two experienced individuals, one from the UN and one from the World Bank, to participate in a staff exchange. The objective of this trust fund is to develop a partnership between both agencies and enhance collaboration on effective multilateral responses in fragile and conflict-affected states. The trust fund is expected to be operational toward the beginning of FY11 and will come under supervision of the SPF Secretariat. 26. Use of UN-World Bank Fiduciary Principles Accord. Last year's SPF Progress Report2 described a number of planned operational improvements: improved processing and guidance, and use of the UN-World Bank Fiduciary Principles Accord (FPA). Three projects have applied the FPA, reducing the time required for project preparation and improving cooperation with UN agencies. UN-Habitat. Supports the research program on the Recovery and Reconstruction of the Nahr el-Bared Palestinian Refugee Camp and Conflict-Affected Areas of North Lebanon, with the aim of promoting a better understanding of fragility and conflict dynamics within the refugee camp and formulating appropriate policy recommendations and measures that would contribute to peace building and conflict prevention in the camp and surrounding areas. UNICEF. Contributes to reducing child mortality in Somalia by supporting the implementation of the Extended Program of Immunization, which aims to reach the majority of children and of women of child-bearing age with basic vaccinations to prevent illness and death and promote well-being. FAO. Contributes to pastoralists' livelihoods by supporting the implementation of the Emergency Livestock Disease Surveillance and Control and Promoting Competitive Meat Industry Project, which aims to provide quality animal health inputs and services and to enhance quality assurance standards in targeted slaughterhouses, to increase competitiveness in regional markets and retain their market shares. 27. Staffing of Secretariat. The SPF Secretariat is now fully staffed to facilitate quality assurance and portfolio management and to carry out impact evaluations of the program. A new Senior Operations Officer (Trust Funds) has been recruited to manage the SPF, LICUS TF, and PCF, and an Operations Officer has been recruited to provide support to the Secretariat. III. PCF AND LICUS TF RESULTS 28. This section provides an overview of the objectives of the LICUS TF and the PCF and highlights key project results under each. 2 State- and Peace-Building Fund--Progress Report (R2009-0129; IDA/R2009-0155), May 21, 2009. 7 A. Post-Conflict Fund 29. A Framework for World Bank Involvement in Post-Conflict Reconstruction, endorsed by the Executive Directors in May 1997, laid the foundation for the establishment of the Post- Conflict Fund (PCF) to enhance the World Bank's ability to support innovative activities in conflict-affected countries and countries in transition from conflict to sustainable peace and development.3 The PCF was mainly funded by the Development Grant Facility, at about $8 million annually, but it also received contributions from donors, including Belgium, Brazil, the Netherlands, and Norway. The objectives of the PCF were to reinforce the Bank's capacity to (a) provide timely and strategic responses to reconstruction situations, with early and flexible engagement; (b) innovate and pilot new approaches; (c) improve knowledge; (d) enhance partnerships and cofinancing; and (e) reduce the impact of conflict and prevent recurrence. 30. PCF Grants. The PCF has funded 224 projects in about 50 countries for a total amount of $110 million, and has disbursed 86 percent of this funding. Of the 18 projects that remain active, most are from between 50 to 90 percent disbursed. The countries that have accessed the PCF have included member countries, territories of member countries, and nonmembers; and grants have been implemented by governments, UN agencies, and NGOs. Many PCF-funded projects progressed well and produced promising results. 1. PCF Results during the Last 12 Months 31. This section highlights the significant results of projects funded by the PCF and the positive impact of PCF funding in fragile and conflict-affected situations. 32. Kosovo: Support for Decentralization. The project was conceived as an emergency operation to support government institutions in applying the provisions of the Law on Local Government Finance adopted in 2008 as a legal framework for decentralization. The initiative has proved instrumental in assisting the overall decentralization process, which is considered to be one of the cornerstones for peace and stability in Kosovo. As a result of the project, the mechanisms for budget allocation to municipalities and the transparency of expenditures at the municipal level in Kosovo have improved significantly. The grant has also supported the Government in improving its planning of investments in alignment with the needs of the local- level population; it has also contributed to the development of information and communication technology infrastructure that allows municipalities to use central government systems, improving linkages between the central government and municipalities. As part of the program, around 100 municipality officials have participated in training activities focused on specialized topics requested by the municipalities themselves, such as service delivery to businesses, automation in service delivery, implementation of new fiscal decentralization arrangements, and management of municipal utilities. More than 300 officials are expected to participate in additional trainings. 33. Jordan/Lebanon: Supporting a Subregional Response to Displaced Iraqis through Ta'leem. The Ta'leem Regional Education Initiative has provided access to quality education for vulnerable Iraqi children and young people who are displaced in Jordan and Lebanon, and their 3 A Framework for World Bank Involvement in Post-Conflict Reconstruction (R97-411), April 28, 1997 8 peers in the host communities. As a result of the program in Lebanon, 2,100 Iraqi students have received scholarships, 5 kindergartens were renovated and equipped to create safe spaces for 205 children, and 680 young people have received life-skills or vocational training. The initiative has also provided training for 145 teachers in inclusion and protection of children, and for 300 parents on children education awareness. In Jordan, 24 kindergartens in 19 schools are being renovated to accommodate displaced Iraqi children. Coordinated by Save the Children, a leader in children and youth programming, the initiative is considered to be a successful practice in the field of providing educational opportunities for young refugees. Establishment of safe spaces for children to learn and socialize has contributed to the overall goal of educating young people and enabling them to become active members of their communities. The Ta'leem initiative eases the stress refugees place on governments, and reduces pressure on displaced Iraqi families by supporting their children. 34. West Bank/Gaza: Palestinian Facility for New Market Development. The Palestinian Facility for New Market Development (FNMD) has, despite a very challenging situation, managed to create an environment conducive to private sector growth in the West Bank and Gaza. The ability of Palestinian companies to increase their sales and exports attests to the Facility's efficiency. Since FNMD's inception in July 2008, private companies in West Bank and Gaza have used projects ranging from $2,000 to $50,000 to develop 4 new products, improve 6 existing products, launch their products in 7 new local markets, and enter 11 new export markets; and 120 companies from a wide range of sectors have come forward with plans to develop new products or reach new markets. With the help of the FNMD, Palestinian businesses have with the help of FNMD moved into new markets outside the region; half of the new export markets are located outside the Middle East, in Europe, Asia, North America, and Africa. Palestinian companies supported by the FNMD are key providers of jobs in the West Bank and Gaza, employing approximately 4,000 workers. The companies are a significant driver of the Palestinian economy. In 2008 alone--the first year of FNMD operation--a total of $178 million in sales was realized, including both the local Palestinian market and international markets. 35. Sri Lanka: Community Peace Councils. The Community Peace Councils/Deshodaya Forums project managed by the Sarvodaya Movement in Sri Lanka is helping communities address issues that are key to their development and peaceful coexistence. The Community Peace Councils have promoted dialogue and mobilized grassroots support to end violence by promoting village economic self-sufficiency and democratic self-governance. Eighteen Community Peace Councils in 7 districts and 7 Peace Resource Centers at the district level have provided a platform for communities to come together, discuss plans for village economic development, and develop a common vision for a peaceful future in which they end the widespread conflicts that have obstructed their development. The Community Peace Councils have produced Community Peace Strategic Action Plans that have helped identify and prioritize the needs of the different communities. Community gathering programs involving a total of 1,750 communities have provided participants with a forum for discussing the conflict situation in the country and necessary peace-building activities. Three peace mediations were carried out at the district level, and five more are planned for 2010. Empowerment of communities, complemented by conflict prevention at the community level has made the project a cornerstone of democratic self- governance in Sri Lanka. 9 B. LICUS Implementation Trust Fund 36. The World Bank launched the LICUS initiative in July 2002 to address the special challenges for the World Bank in supporting countries with weak policies and institutional capacity. In January 2004, the LICUS TF was approved by the Executive Directors through a transfer of $25 million from surplus income. The LICUS TF was replenished in 2006 with $25 million and again in 2007 with $30 million. Denmark and Norway also contributed funds to the LICUS TF. The objectives of the LICUS TF were to (a) support the implementation of early policy and institutional reforms to improve performance, and facilitate reengagement with the international community; (b) develop resilient systems for social service delivery, including HIV/AIDS programs, that can continue to operate effectively, and mobilize multidonor support even during political instability; (c) develop harmonized multidonor approaches that combine scarce resources behind a selective strategy for reform; and (d) promote the delivery of visible results in support of peace-building efforts. 37. LICUS TF Grants. Since its establishment in 2004 the LICUS TF has funded a total of 98 projects in 15 countries for $94 million and disbursed 83 percent of this funding. Of the 29 projects that remain active, most are 60-97 percent disbursed. Implementing agencies for LICUS grants have included member countries and their agencies, nongovernmental organizations, United Nations agencies, and--because government capacity is weak in many fragile states--the Bank, at the recipient's request. Through its grants the LICUS TF has made a significant contribution to countries' stability and reconstruction, providing critical support and enabling the World Bank to make substantial progress in reengagement in certain countries. LICUS TF support has been particularly crucial to countries in nonaccrual, which do not have access to other sources of Bank funds to sustain engagement.4 38. Support to Bank-managed Multidonor Trust Funds. The LICUS TF provided seed funding to two multidonor trust funds (MDTFs) supporting fragile states. The first contribution was for $3 million to the Liberia Reconstruction Trust Fund to support the Government of Liberia in improving the enabling environment to increase economic growth, thus facilitating an increase in basic services and building government capacity to plan and manage development projects. The second contribution was for $1 million to the Zimbabwe MDTF to contribute to analytic work on the key development challenges facing Zimbabwe in the context of IDA's Interim Strategy Note, and to develop suitable instruments that can enable both the Government and the Trust Fund donors to respond quickly to changes in conditions for reengagement. To date, these MDTFs have leveraged an additional $32 million and $5 million, respectively, from other donors. 1. LICUS TF Results during the Last 12 Months 39. Côte d'Ivoire: Support to Safeguard and Modernize the Civil Registry. Citizen identity has been both a root cause of conflict and a subsequent major protection concern in Côte d'Ivoire. As a result of conflict around the issue of national identification, many Ivoirians lack the documentation that would allow them access to justice, participation in elections, freedom of 4 Engaging with Fragile States ­ An IEG Review of World Bank Support to Low-Income Countries Under Stress, IEG, World Bank, 2006. 10 movement, land ownership, access to formal education and employment, and demobilization. Proper identification is, therefore, a prerequisite for ensuring that the fundamental rights of Ivoirians are met; and it is also seen as a prerequisite for reconciliation and a key mechanism for preventing further conflict in the country. The project supported citizens in obtaining legal identity documents: 7,000 people received detailed information on the process of registration, and more than 14,000 have already obtained proper identity documents. Several institutions, including the World Bank, the European Commission, and the Norwegian Refugee Council, have joined forces in helping restore the civil registry in the country. Alongside building capacity for issuing legal documents, the project has helped construct new National Archives and establish a reliable computer system to manage identification records in the country, and has also improved linkages among different state agencies in sharing information on different aspects concerning the newly registered populations, such as education, health, and justice. 40. Democratic Republic of Congo: Socioeconomic Reintegration of Ex-combatants. Under this project, 4,000 ex-combatants--1,000 in North Kivu and 3,000 in South Kivu, who were previously demobilized in the eastern Democratic Republic of Congo--participated in agricultural training and received reintegration start-up kits that included seeds, tools, and bicycles. The initiative also supported radio programs, leisure activities, and live concerts to sensitize ex-combatants, local authorities, and communities, with the objective of bringing ex- combatants and other community members together and helping former combatants reintegrate into the social fabric of their societies. The project proved successful in keeping up the momentum created by the Multiagency Demobilization and Reintegration program (MDRP) that operated in the Great Lakes region of Central Africa from 2002 to 2009. The initiative in the Democratic Republic of Congo built on the MDRP, contributing to security and stability in the Eastern part of the country by providing socioeconomic support to demobilized ex-combatants. Dismantling armed groups and reintegrating former soldiers has proved to be an inseparable part of the peace process and development agenda in the Democratic Republic of Congo, complementing development efforts. 41. Guinea Bissau: Support to Economic Governance. This grant supported the Government in improving its public financial management system and strengthening economic governance in the key areas of budgeting, payroll, and public procurement management. As a result of the project, the country has advanced reforms in the areas of expenditure control and revenue collection, improving administrative capacity in these fields. An action plan for reforms in the public procurement system is being implemented in six ministries, and preparation and implementation of public contracts are now being carried out according to the new procurement procedures in the Ministries of Education, Health, Finance, Agriculture, Infrastructure, Commerce and Industry, Defense, Economy, Fisheries, Transports, and Telecommunication. All public revenues are being collected in the general budget, and all payment operations are made by a single Treasury. The project helped the Government negotiate a debt rescheduling agreement and facilitated the process of issuing treasury bonds, thus contributing to reducing the budget's financing gap. Another noteworthy result of the project is the enhanced collaboration between the Government and donors on issues related to public-private partnerships, which has implications for the quality of critical basic services in the country that go beyond this project. 11 IV. FINANCIAL STATUS 42. As of March 31, 2010, the SPF had received a total of $87.3 million: World Bank contributions ($66.6 million), donor contributions ($18.9 million), and investment income ($1.7 million). Of these total receipts, $5.2 million is reserved for a period of three years (FY09-11) to cover the costs of program management, quality control and knowledge management and learning.5 An additional $0.4 million was expended at the beginning of the trust fund to cover administrative fees. Thus the total amount of funds available to finance projects is $81.6 million (see Table 2). From this amount, the SPF Committee has approved 28 projects in 18 countries, for $59.2 million,6 leaving a balance of $22.4 million available for new project commitments. Table 2. Funds Available to Finance Projects (US$ millions, as of March 31, 2010) Category FY09 FY10 (end of Q3) Total Receipts World Bank 33.3 33.3 66.6 Donors 18.9 18.9 Investment income 1.2 0.6 1.7 Expenses: Admin fees (0.4) (0.4) FY09-11commitment: Program mgt. (5.2) (5.2) Total 47.8 33.9 81.6 Project commitments (FY09-FY10 end of Q3) (59.2) Balance remaining for new project commitments 22.4 43. SPF Donors. In addition to the World Bank contribution of $66.7 million (FY09-10), donors have contributed $18.9 million in funding (see Table 3). In FY10, Denmark joined as a new donor and committed to financing $5.4 million across three years, FY10-FY12. The first installment from Denmark, $1.8 million, is expected in April 2010. Once this installment is received, the balance available for new project commitments will be $24.2 million. Table 3. Donor Contributions to SPF (US$ millions, as of March 31, 2010) Amount projected Donor Amount received (FY10-FY12) Total Australia (AusAid) 1.6 - 1.6 Netherlands 14.0 - 14.0 Norway 3.3 - 3.3 Denmark - 5.4 5.4 Total 18.9 5.4 24.3 5 Total amount for program management approved by the Board is $8.2 million for six years. OPCS also contributes BB in support of the Secretariat's program management. 6 The Annex to this paper lists the approved projects. 12 44. Demand for SPF Funding. The demand for SPF funds continues to be very high, and a substantial pipeline of proposals is waiting for funds to become available: 22 projects for $52 million. This demand stretches across all Regions--AFR (8), EAP (2), ECA (1), LCR (4), MNA (3), and Regional (4)--and the projects in the pipeline include activities supporting youth in conflict; developing methods to improve aid to subnational conflicts; improving water and sanitation in conflict areas; and responding to natural disasters like the earthquake in Haiti. The SPF will be able to cover the existing financing demands once the last World Bank commitment of up to $33.3 for FY11 is received. 45. SPF Project Disbursements. Project disbursements increased threefold from the end of FY09 ($0.7) to the end of Q3 in FY10 ($2.8), resulting in a total disbursement amount of $3.5 million (see Table 4). The SPF is in its early days of implementation, and approved projects take on average four months from approval to grant signing and effectiveness. OPCFC is working to refine internal administrative procedures to reduce this time lag; however, given the design and context of these projects, it is normal for disbursement to be slow during the first phase of implementation. In particular, appropriate institutional frameworks have to be established in weak and unstable environments to allow for the execution of the project and to reduce fiduciary risk. Once the administrative, institutional, and fiduciary systems are in place, disbursement rates should increase substantially, as the PCF and LICUS trust funds have demonstrated. Table 4. Project Commitments and Disbursements (US$ millions) Category FY09 FY10 (end of Q3) Total Commitments 39.1 20.1 59.2 Disbursements (0.7) (2.8) (3.5) Balance remaining to disburse 38.4 17.2 55.6 46. PCF and LICUS Financial Status. The PCF and LICUS TF are almost fully committed. Any income earned from investment income or undisbursed balances from projects will be reallocated to existing well-performing projects that can disburse all funds before the closing date of the trust funds, December 31, 2011. Both trust funds combined have disbursed a total of $12.4 million in the first three quarters of FY10. As of March 31, 2010, total amounts available for new commitments under the PCF and LICUS TF equal $1.1 million (see Table 5). Table 5. Balance Summary for PCF and LICUS (USD Millions, as of March 31, 2010) Category PCF LICUS Total Beginning balance FY10 (carry over from FY09) 18.6 24.3 42.9 Investment income (FY10) 0.2 0.3 0.5 Project disbursements (FY10) (4.4) (8.0) (12.4) Balance remaining to disburse 14.4 16.6 (31.0) Project commitments (remaining balances) (13.6) (16.3) (29.9) Balance available for new commitments 0.8 0.3 1.1 13 47. Korea Trust Fund for Economic and Peace-Building Transitions. In FY10, Korea provided $5 million for a new trust fund that is managed by the SPF Secretariat. The objective of this trust fund is to address the needs of state and local governance and peace-building in fragile, conflict-prone, and conflicted-affected situations. The regional focus of the trust fund is Asia; however, 20 percent of the funding may be used outside the region. The funds from this trust fund are expected to be committed to new projects in the last quarter of FY10 and in FY11, and the procedures for approval and oversight will be the same as the procedures used for the SPF. V. THEMATIC APPROACHES IN FRAGILE STATES 48. A key element of the SPF program is to understand the impact of approaches and interventions it supports. The PCF and LICUS TF are also primary sources of learning because most of the projects are advanced enough in implementation to enable the Bank to draw concluding lessons by country, region or theme. The learning and application of these lessons will help to guide the strategic direction of the SPF and inform the areas of work that the SPF engages in. 49. SPF Evaluations and Learning Activities. The Secretariat has initiated knowledge work in two thematic areas, youth and gender based violence. The first activity aims to strengthen monitoring and evaluation approaches for youth development projects in conflict-affected countries in Europe and Central Asia. The Social Development unit in the ECA Region and the State and Peace-building Fund (SPF) will collaborate to strengthen the monitoring and evaluation capacity and methodologies of projects in six countries in the Region that focus on youth development, inclusion, and employment. Three of these projects are funded by the SPF and targeted at addressing the impact of conflict on youth and mitigating the risk of future violence and armed conflict. These projects offer a rich opportunity to gather strong data on the effectiveness of different types of programmatic interventions for youth outcomes in countries affected by conflict, and to identify lessons that can be used to strengthen the design of future SPF and other Bank-funded projects. The second activity is examining gender-based violence (GBV) in Sub-Saharan Africa. Impact evaluations will be carried out for two SPF-funded projects in Côte d'Ivoire and the Democratic Republic of Congo. GBV is a new area for the World Bank, and the impact evaluations will be useful to inform future projects. The two evaluations will be coordinated closely in an effort to obtain comparable results and therefore establish a more robust basis on which to draw (the two projects include different activities but have enough in common to make comparisons worthwhile). Some of the work under the evaluations will aim to identify low-cost and scalable socioeconomic interventions that demonstrably improve the mental, social, and economic functioning of survivors of sexual violence in Eastern DRC. The impact evaluations are being developed in close cooperation with research partners, including Johns Hopkins University, as well as the implementing agency for both projects. 14 50. PCF and LICUS TF: Youth Empowerment. Youth projects funded by the PCF and LICUS have focused on increasing the access of young people to education, enhancing their employment and employability, improving their livelihoods, promoting tolerance and peace, and expanding the capacity of youth ministries in implementing youth empowerment projects and improved youth policies. From life-skills and healthy lifestyles trainings for youth through capacity building for educators and government officials, career guidance, entrepreneurship programs, and microcredit opportunities, to violence prevention and peace-building, youth activities are helping young people become active participants in the social, economic and political spheres of their societies. Box 1 lists some results produced by projects that have contributed to youth empowerment. Box 1. Examples of Projects Supporting Youth Empowerment North Caucasus Youth Empowerment and Security Project, Russia (North Caucasus) 8 leadership and peace-related trainings and 2 summer camps have trained more than 680 young leaders. 13 Peace Centers were established to develop leadership skills of youth and participation in community life. In July 2009 the first North Caucasus Youth Steering Committee was established to facilitate dialogue between Youth Ministries and youth committees representing five republics. 3 NGOs have provided trainings for young people to increase their capacity to lead programming within their own youth organizations. Youth Empowerment and Security Grant, Kosovo 2 Youth Resource Centers established in Pristina provide young people with information and services necessary for their personal and career development. 13 youth centers received grants for implementing youth development, peace, and tolerance projects. In 2008, 4,645 youth benefitted from youth centers--an 11-fold increase compared to 2007. A workshop with Youth Voices groups and Youth Centers provided information on successful youth initiatives. A Youth Department was established in the Ministry of Culture, Youth and Sports. Youth Employment Pilot, Côte d'Ivoire A new mechanism was piloted at the level of "communes" for efficiently linking youth looking for employment with the real job market in their area of residence. Mechanisms were created to offer support on short-term training, apprenticeships, employment, and creating microenterprises. Maintenance of 150 km of paved national roads generated 27,000 work days. 5,000 man-days of permanent employment were generated by waste collection and management centers. 150 permanent jobs were created for urban cleaning management. An assessment of vocational training provided insights on key reforms, which will provide input to the Government's new strategy. Rubber production, a major value chain in the country, has helped generate 250 full-time jobs in 20 rubber nurseries. 51. PCF and LICUS TF: Community-Driven Development. Community-driven development (CDD) projects funded by the PCF and LICUS TF have focused on increasing communities' capacity to prioritize, develop, and implement initiatives that are key to their 15 livelihoods and development. From establishing community action groups and building the capacity of community members, to making grants and loans to community-based organizations, CDD projects have helped both authorities and communities improve service delivery in a number of sectors that are important to sustainable development of their societies. Box 2 lists some results that have contributed to improved community mobilization for service delivery. Box 2. Examples of Projects Supporting Community Driven Development Consultative Service Delivery Initiative (CSDI), Iraq ­ Phase I 8 Community Action Groups (CAGs) in the Sulaymaniya governorate were established and mobilized. 72 CAG members were elected (24% women). CAG members were trained in community mobilization, project identification and design, resource planning, and procurement. 19 projects--most in the areas of water, electricity, youth, and women--were selected, funded, and implemented by the communities. Communities and local governments shared the cost of community projects that, after completion, were transferred to public agencies for maintenance and management. The project resulted in increased communities' capacity for and frequency of interaction with local, provincial, and regional government representatives. CSDI I was successfully finalized and a scaled-up CSDI II, funded by the SPF, is starting implementation. Community-Driven Recovery and Development, Somalia 139 grants for a total of $1,477,000 funded projects focused on social service delivery, agriculture, education, environment, health, income generation, community infrastructure, sanitation, and water. 81 Community Development Committees (CDCs) were established. 800 members of CDCs and 30 community development workers were trained. More than 65,000 work days were generated by the project in building community infrastructure. 500 small businesses were supported with small loans. Community Action Plans were developed and endorsed by local authorities. Niger Delta Community Foundations Initiative, Nigeria The Rivers State Community Foundation (RSCF), including staff and subcommittees, was established, and its Constitution, Manual of Operations, website, and guidelines for grant applicants were developed. 12 RSCF board members went on study trips to Tanzania, Northern Ireland, and the UK. RSCF staff participated in capacity-building exercises. 5 jobs were generated by the Community Foundation. Grant making will soon commence and is expected to create more jobs. 16 VI. FUTURE DIRECTIONS 52. The SPF has emerged as an instrument that complements IDA, particularly in countries or situations where it is difficult for IDA to operate; it also complements the UN Peace-building Fund, which tends to finance activities that are outside the Bank's mandate or expertise. The PCF and LICUS TF are almost entirely committed and are due to close on December 31, 2011; the SPF will remain as the primary multicountry trust fund for responding flexibly to emerging conditions in FCS. 53. Review of Issues. The SPF Secretariat has reviewed in detail the issues that have slowed the start of some SPF-funded activities. The findings of these reviews are consistent with those of other reviews of operations in FCS; when implemented, they should lead to a strengthened Bank response in FCS. In addition, the SPF tends to fund larger activities that the PCF and LICUS TF did, which will lead to economies of scale and more attention by Regional management, although the need will remain for some smaller projects of a pilot or innovative nature. 54. Need for Innovative Financing. The challenge for the international community is to respond to the demand for innovative financing in FCS to (a) address the difficulties these countries are experiencing in meeting the MDGs; (b) provide flexible support to countries emerging from conflict or turning around their performance, so as to minimize the risk that violence will recur; and (c) maintain human and institutional capacity in countries in crisis. The SPF has attracted some donor contributions and further donor support is likely, particularly when SPF matures and implementation of activities starts to produce results. Nevertheless, SPF is likely to require direct Bank support during the next few years. 55. Request for Board Approval. With this report, Management formally seeks the Board's approval for the third contribution to SPF of up to $33.3 million as part of the Bank's FY11 Budget.7 7 As the recent Medium-term Strategy and Finance paper stated (SecM2010-0168, April 1, 2010, paragraph 107), Management plans to implement an improved cash management framework for the major multiyear grant- making facilities, such as the IDF and the SPF, that will optimize cash transfers from IBRD while ensuring that these programs are sufficiently resourced to honor the Bank's legal commitments with the programs' grantees. 17 Annex. All SPF-Approved Projects by Region Grant amount Country Project title (US$) AFR CAR Safe and Reliable Public Electricity Project 2,500,000 Côte d'Ivoire Strengthening communication and transparency for governance reform 1,400,000 Côte d'Ivoire Protection from Gender-Based Violence 2,050,000 Côte d'Ivoire Young Entrepreneurs and Urban Job Creation 2,000,000 DRC Addressing Gender-Based Violence in South Kivu 1,984,787 Guinea Bissau Support to National Health Development Plan - Phase II 2,041,500 Guinea Bissau Economic Governance Support 1,740,000 Guinea Bissau Participatory Rural Development Grant (PRD) 5,000,000 Liberia Land Sector Reforms 2,982,000 Nigeria Community Foundations Initiative 1,386,200 Emergency Livestock Disease Surveillance and Control and Promoting 900,000 Somalia Competitive Meat Industry Somalia Support to the Extended Program of Immunization (EPI) in Somalia 499,990 Togo Private Sector Revitalization 1,100,000 Zimbabwe Agricultural Inputs Project 4,900,000 EAP Nepal Program to Promote the Demand of Good Governance 3,000,000 Encouraging More Resilient Communities in Conflict-affected Areas in 2,570,000 Philippines the Philippines Solomon 2,000,000 Islands Rapid Employment Solomon 900,000 Islands Mining Sector Technical Assistance (Phase 1) Thailand Piloting Community Approaches 2,600,000 ECA Georgia Internally Displaced Peoples Community Driven Development 2,209,400 LAC Colombia Protection of Patrimonial Assets -Phase III 5,000,000 Haiti Rural Water and Sanitation 5,000,000 MENA Iraq Regional Perspectives on Iraqi Displacement 321,304 Iraq Consultative Service Delivery Program (Phase II) 4,985,000 Lebanon Nahr el-Bared Palestinian Refugee Camp 90,000