Document of The WorldBank FOROFFICIAL, USEONLY ReportNo: 48648-MN PROJECTAPPRAISAL DOCUMENT ON A PROPOSEDCREDIT INTHE AMOUNT OF SDR 1.4 MILLION (US$2 MILLION EQUIVALENT) TO THE MONGOLIA FORA MONSTAT: STRENGTHENING THENATIONAL STATISTICAL SYSTEM OF MONGOLIAPROJECT INSUPPORTOF THEMULTICOUNTRY STATISTICAL CAPACITY BUILDING PROGRAM May 15,2009 PREM Sector Department(EASPR) EastAsia Pacific Region(EAP) This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS Exchange Rate Effective: May 15,2009 Currency Unit = MongolianTugrik MNT1,422 = USD 1.00 MNT2,135 = SDR 1.00 US$1.49558 = SDR 1.00 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank BOP Balance of Payments CAS Country Assistance Strategy CPAR Country ProcurementAssessment Review CPI Consumer Price Index CPPR Country Portfolio PerformanceReview EASPR Poverty ReductiodEconomic Management, EastAsia and Pacific Region EU EuropeanUnion FA0 Food andAgriculture Organization ofthe UnitedNations FMS Financial Management System FY Fiscal Year GDDS General Data Dissemination System GDP Gross Domestic Products GIS Geographical InformationSystem GNI GrossNationalIncome GOM Government of Mongolia IBRD International Bank for Reconstruction and Development I C M Implementation Completion Memorandum IDA International Development Association IMF International Monetary Fund IT InformationTechnology I S N InterimStrategyNote MAPS Marrakech Action Planfor Statistics MDG MillenniumDevelopment Goals h4NT MongolianTugriks MONSTAT Strengtheningthe National Statistics Systemof Mongolia NDS NationalDevelopment Strategy NSDS NationalStrategy for the Development of Statistics NSO NationalStatistical Office OECD Organization for Economic Cooperationand Developments PCT Project Coordination Team PIU Project Implementation Unit FOROFFICIAL USE ONLY POM Project Operational Manual PPI ProducerPrice Index PSC Project Steering Committee SMP Statistical Master Plan SNA System ofNationalAccounts STATCAP Statistical Capacity Building TFSCB Trust Fundfor Statistical Capacity Building UNICEF UnitedNations Children Fund WB World Bank Vice President: James W. Adams Country Director: DavidR. Dollar Sector Director VikramNehru STATCAP Program Manager MishaBelkindas Country Manager Arshad MSayed Sector Manager: LindaVan Gelder Task Team Leader: Mustafa Dinc This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. MONGOLIA MONSTAT: Strengtheningthe NationalStatisticalSystem ofMongolia CONTENTS Page I STRATEGICCONTEXTANDRATIONALE . .................................................................. 1 A. Country and sector issues.................................................................................................... 1 B Rationale for Bankinvolvement.,........................................................................................ . 2 C .Higher level objectivesto whichthe project contributes .................................................... 3 I1. PROJECTDESCRIPTION .............................................................................................. 4 A . Lending instrument.............................................................................................................. 4 B .Program objective andPhases............................................................................................. 4 C. Project development objective andkey indicators .............................................................. 5 D . Project components .............................................................................................................. 6 E. Lessons learned andreflected inthe project design ......................................................... -12 F. Alternatives considered and reasons for rejection............................................................. 13 I11. IMPLEMENTATION ..................................................................................................... 14 A . Partnership arrangements ................................................................................................. 14 B . Institutional and implementation arrangements ................................................................ 14 C . Monitoring and evaluation o f outcomeshesults ................................................................ 15 D Sustainability..................................................................................................................... . 15 E. Critical risks and possible controversial aspects ............................................................... 16 F. Loadcredit conditions and covenants ............................................................................... 17 I V . APPRAISAL SUMMARY .............................................................................................. 18 A . Economic and financial analyses....................................................................................... 18 B. Technical .......................................................................................................................... -19 C. Fiduciary............................................................................................................................ 19 D Social................................................................................................................................. . 20 E . Environment ...................................................................................................................... 20 . . F . Safeguard policies.............................................................................................................. 21 G . Policy ExceptionsandReadiness ...................................................................................... 21 Annex 1:Country andSector or ProgramBackground .......................................................... 22 Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies ..................27 Annex 3: ResultsFrameworkandMonitoring ......................................................................... 30 Annex 4: DetailedProjectDescription ...................................................................................... 37 Annex 5: ProjectCosts................................................................................................................ 51 Annex 6: ImplementationArrangements .................................................................................. 53 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 55 Annex 8: ProcurementArrangements ....................................................................................... 66 Annex 9: EconomicandFinancialAnalysis .............................................................................. 69 Annex 10: SafeguardPolicyIssues ............................................................................................. 70 Annex 11:ProjectPreparationandSupervision ...................................................................... 71 Annex 12: Documentsinthe ProjectFile .................................................................................. 72 Annex 13: Statementof Loansand Credits ............................................................................... 73 Annex 14: Countryat a Glance .................................................................................................. 74 Annex 15: GovernanceandAccountability Issues ................................................................... 76 MONGOLIA MONSTAT: STRENGTHENINGTHENATIONAL STATISTICAL SYSTEMOF MONGOLIA PROJECT APPRAISAL DOCUMENT EASTASIA AND PACIFIC EASPW Date: May 15, 2009 Team Leader: Mustafa Dinc Country Director: David R. Dollar Sectors: Generalpublic administration sector Sector ManagedDirector: VikramNehru (80%); Central government administration (20%) Themes: Economic statistics, modeling and forecasting (P);Managing for development results (P);Poverty strategy, analysis and monitoring (S);Other economic management (S);Other public sector governance (S) Project ID: P113160 Environmental screening category: C ILending Instrument: Adaptable Program Loan For Loans/Credits/Others: Total Bank financing (US$m.): 2.00 A terms for Mongolia(40 years amortization including 10year Borrower: Mongolia ResponsibleAgency: National Statistical Office of Mongolia Expected effectiveness date: June 30, 2009 Expected closing date: December 3 1.2014 Does the project depart from the CAS incontent or other significant respects? Ref: PAD I.C. [ ]Yes [XINO Does the project require any exceptions from Bank policies? Ref: PAD IV.G. [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [XINO I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? Ref:PAD III.E. [ ]Yes [XINO .I Does the project meet the Regional criteria for readiness for implementation? Ref:PAD IV.G. [XIYes [ ]No Project development objective Re$ PAD II.C., TechnicalAnnex 3 The main objective o fthe project is to improve efficiency and effectiveness o f the national statistical systemo f Mongolia to enable it to provide relevant, timely and reliable data for evidence-based policy making in support of Government's MDG-based National Development Strategy (NDS). Project description [one-sentence summary of each component] Ref: PAD II.D., Technical Annex 4 Improving policy, regulatory, and institutional framework and the organizational structure o f the statistical system Strengthening the statistical infrastructure 0 Upgrading statistical operations (improving individual subject matter programs and methodologies as well as the existing data outputs) IT infrastructureand equipment Project management Which safeguard policies are triggered, if any? Ref: PAD IKF`., TechnicalAnnex 10 There i s no safeguard issue triggered by the project. Significant, non-standard conditions, if any, for: Ref: PAD III.F. Boardpresentation: This i s a STATCAP project, which i s approved by the Regional Vice-president. N o Board presentation required. Loadcredit effectiveness: June 30, 2009 Covenantsapplicableto projectimplementation: Management approvalcondition The PCT has beenset up by the NSO including the hiringo f a procurement officer and a financial management officer. ' The Project Operations Manual and the FinancialManagement Manual have beenapproved and adopted by the NSO inform and substance satisfactory to the Association. Effectivenesscondition: The SubsidiaryAgreement has been executed on behalfo fthe Recipient and the NSO inform and substance satisfactory to the Association. The financial management officer and procurement officer o fthe PCT have completed their training infinancial management and procurement respectively, ina manner acceptable to the Association, to ensure compliance with the accounting, monitoring and reporting requirements under the Project. Other Covenants: Maintainthe NSC, throughout the period o f implementationo f the Project, headed by the Chairman o f the NSO, with representation from the Recipient's executive branch, the Parliament and scientific research institutions. Maintain throughout the period o f implementation o f the Project, a project coordination team (PCT), headed by a qualified and experienced Project Coordinator, andprovided with sufficient resources and competent staff inadequate numbers, under terms o f reference satisfactory to the Association. Establishwithin the NSO, by no later than one month after Effective Date, and thereafter maintain throughout the period o f implementation o f the Project, a review and monitoring committee, headed by the Deputy Chairman o f the NSO, with representation from, inter alia, the three (3) department heads o f the NSO, and staff o f the PCT. Select and engage, by no later than December 31,2009, the services o f an independentauditor acceptable to the Association, under terms o freference satisfactory to the Association. Prepare, and regularly update an Annual Plan for the Project identifying Project activities by component and sub-component, and their related expenditures and financing sources; which plan shall be submitted to the Association for review and comments. There are other covenants relating to the subsidiary agreement and other implementation arrangements that are included inthe FinancingAgreement. I. STRATEGICCONTEXTANDRATIONALE A. Countryand sector issues 1. Mongolia i s a landlocked country between Russia and China with an area o f 1.6 million square kilometers and a population o f 2.56 million. Mongolia i s the least densely populated country in the world and more than a third o f the population continues to rely on semi-nomadic livestock herding as their primary source o f livelihood, and many more depend on it for part o f their income. However, these ways of life are changing rapidly, as Mongolia undergoes political, economic, and spatial transitions. Mongolia has been doing quite well in its transition from a planned economy to a market economy since the early 1990s. Mongolia has held four peaceful and fair parliamentary elections since 1992. A framework o f market and democratic laws and institutions has been put inplace, there is an active media, and a vocal civil society increasingly engages on the political front. The Government has undertaken various fundamental economic reforms and significant progress has been made towards reducing the incidence o f poverty. Even though the reform progress has moved in a "stop and go" fashion during the past decade, it should be noted that the direction o f the overall reform path has been towards a market-oriented economy. 2. As a result o f these developments there have beensignificant in-migration to urbanareas; hence population and economic growth have become increasingly concentrated inthe capital city o f Ulaanbaatar. Eventhough poverty seems declining, still over a third o f the population remains poor. 3. Recently, the Government o f Mongolia has prepared a National Development Strategy (NDS), which was approved by the parliament that covers an ambitious development agenda with six main priorities to be carried out through 2021. The agenda includes: (i) achieving the MDGs; (ii) developing an export-oriented, hightech, knowledge-based economy; (iii) exploiting strategic minerals to build savings, growth, and modern processing industry; (iv) developing regions and infrastructure to reduce urban-rural disparities; (v) halting ecosystem imbalances; (vi) consolidating political democracy and an accountable systemthat is free from corruption and red tape. This ambitious agenda is quite data and information intensive and achieving the proposed goals requires a well functioning national statistical system. 4. Before 1990, the Mongolian statistical system was organized in a manner typical o f command economies, with main reliance on compulsory submission o f administrative reports by enterprises. In 1990, the Central Statistical Office was reorganized as the National Statistical Office (NSO), just at the time when Mongolia had begun to shift to parliamentary government and a market economy. 5. Since then the national statistical system in general and the NSO inparticular have made significant improvements with the help o f various donors and development agencies', however the national statistical system as a whole still needs improvements ingeneral, and incertain areas where the project's involvement could make a significant difference. The Bank provided a grant from Trust Fund for Statistical Capacity Building (TFSCB) to the National Statistical Office o f 1For more details see Mongolia: National Strategy for the Development of Statistics, December 2007 sections 1-2 1 Mongolia (NSO) in 2001 to develop a Statistical Master Plan (SMP) among other statistical capacity improvement activities. The project was completed in June 2004 and the SMP was approved by the State Great Khural (Parliament) in January 2006. Recently, the NSO has received a small grant from the Bank (TFSCB) to prepare the National Strategy for the Development o f Statistics (NSDS) that updated the SMP along with a financing strategy for the implementation o f it. The NSDS was completed and discussed at the stakeholders' consultation workshop in October 2007. Following the workshop the NSO submitted the NSDS to the National Statistical Council, which has approved the updated NSDS and new action plan in December 2007. The NSO has adopted this updated NSDS and action planin order to implement it. Based on these developments the Minister of Finance has sent an official letter to the Bank requestingassistancefor the implementationo fthe NSDS. 6. Another important point worth mentioning is the relevance and timeliness o f the project in light of the ongoing global financial crisis and its implications for Mongolia. It should be noted that duringthe time o f crisis the need for reliable official statistics becomes most apparent and urgent because o f the well known fact that better decisions could be made if they are informed by good statistics. It should also be noted that the cost o f poor decision making during such times could be very high.Inthat sense the value of reliable and timely statistics appears to be quite obvious, hence this investment in statistical capacity o f the national statistical system seems quite timely. There are certain emerging needs as a result o f the financial crisis such as good quality and reliable data on National Accounts and price statistics that are included as priority areas inthe project. Further, the project focuses on the improvement o f the fundamentals . o f the statistical systemthat are necessary to produce relevant, reliable and timely statistical data on their own. Improving dialogue between statisticians and policy makers as well as other users; and improving analytical capacity o f bothproducers and users inusing already existing data will helpthe government incrisis management. 7. The proposed project to implement the NSDS is in line with the major pillars o f the current I S N and has been included in it as part o f supporting the government to implement "second generation" reforms where the Bank can assist the Government in strengthening the national statistical system to produce reliable, timely and quality data for monitoring o f key poverty and development indicators. The outputs o f this project will help sustaining achievements o f the I S N pillars inthe mid to long term. Meanwhile, to build on what has been achieved and to avoid duplication the project team i s closely coordinating with Governance Assistance Project that has a component on "Capacity Building for Data Transparency and Data Access for Poverty Monitoring" as well as with the Economic Capacity BuildingTA project. B. Rationale for Bankinvolvement 8. Weak and ineffective national statistical systems seriously constrain decision making and monitoring progress in many countries. Limited statistical capacity remains the main obstacle to better monitoring o f Poverty Reduction Strategies and to measuring progress towards the Millennium Development Goals (MDGs). It is also a major constraint on managing for *The NSDS provides a road map for the next five years and implementation of it will significantly improve the capacity of NSO and other agencies that will be responsible for data collection and dissemination and monitoring and evaluation. It was developedby NSO with a TFSCB grant. 2 development results in many countries. The increased emphasis on results in both IDA 14 and IDA 15 has focused attentionon the statistical systems of low income developing countries. The IDA 15 Results Measurement System inparticular, focuses on the need to promote demand for good statistics, to close the gaps indata coverage and to eliminate statistical weaknesses through IDA operations or donor community initiatives. 9. The rationale behind the Bank's involvement and its leadership in this project can be explained by two main reasons. First, the Bank has a mandate to lead in statistical capacity activities particularly in IDA countries. During the IDA 14 replenishment negotiations, deputies requested that IDA should play a leadership role inthe global partnership for statistical capacity- building. This was reinforced during the IDA 15 negotiations. As part of the IDA15 Results Measurement System, results based Country Assistance or Partnership Strategies are expected to include a review o f national statistical systems and an identification o f what i s needed to strengthen capacity both to generate and to use statistical data. IDA15 Report3clearly states that statistical capacity building will be given prominence during IDA15, especially in by mainstreaming a comprehensive discussion on country statistical systems in ISNs and following up with relevant instruments, in line with partner country priorities and in collaboration with other donors. 10. The second reason for Bank's leadership i s that the Bank has a substantial experience in assisting countries in statistical capacity improvement activities along with the necessary means to support such projects. This gives the Bank a comparative advantage. Further, the Bank provided some support to the NSO in the past and gained significant experience in the Mongolian statistical system. Therefore, the Bank i s better positioned to play a leading role in supporting the improvement o f the statistical system in Mongolia as well as coordinating donor efforts for this purpose. 11. The NSO has demonstrated its readiness to work on the project. The State Great Khural (parliament) approved the SMP on January 20, 2006 and the National Statistical Board approved the recently updated NSDS and new action plan in December 2007. The NSO has adopted this updated NSDS and action plan inorder to implement it. This i s an indicator that the Government i s committed to improving the national statistical system. C. Higher levelobjectives to which the project contributes 12. The long-term vision for the Mongolian statistical system is to produce and disseminate a growing variety o f data that meets user needs and informs decision-making within the government and community. This will be accomplished by continually striving to improve the quality and relevance o f the data. The major strategic objectives for the NSDS process are to upgrade the conceptual, methodological and analytical skills o f the national statistical system includingNSO and other data producer and user agencies o f the country; while meetingthe basic requirements for monitoring the macroeconomic situation, the MDG indicators, and the other national development objectives. Accomplishing these objectives will require upgrading the skills of specialists and gradually empowering them to make judgments about the data that they IDA15 Report from the Executive Directors o f the International Development Association to the Board of Governors; IDA: The Platformfor Achieving Resultsat the Country Level, February 28, 2008 3 produce and use. This will be achieved by (a) improving policy, regulatory, and institutional framework, (b) strengthening the statistical infrastructure, (c) upgrading statistical operations (improving individual subject matter programs and methodologies as well as the existing data outputs), and (d) investments inphysical infrastructure and equipment. 11. PROJECT DESCRIPTION A. Lendinginstrument 13. This project will be an IDA Specific InvestmentCredit inthe amount o f SDR equivalent to US$2 Million for a period o f five years, under the umbrella o f the STATCAP4 Adaptable Program Loan/credit/grant (APL) to improve statistical capacity through a system-wide approach using the NSDS as the basis for investments. The cornerstone o f a STATCAP project i s the development o f a comprehensive and integrated national action plan for statistical capacity building, often linked to a National Strategy for the Development o f Statistics (NSDS) or a Statistical Master Plan (SMP), which i s prepared through consultation with both data providers and data users. 14. Mongolia has met all requirements o f STATCAP and the project components are designed to support the implementation o f the NSDS, and will be implemented in a coherent, consistent and well-sequenced manner. B. ProgramObjectiveand Phases The overall development objective o fthe STATCAP program is to increase access to assistance to strengthenNational Statistical Systems and increase their capacity to produce more reliable, timely and accurate data. The first phase of the program (Phase I)consists o f individual lending operations up to an aggregate amount o f US$ 200 million, with a duration o f five years. Phase Ia, comprising the first two projects for Burkina Faso and Ukraine, were approved by the Board. Subsequent country operations under Phase Ib are to be prepared in countries meeting the eligibility criteria set out below, and will follow the prototypes developed in Burkina Faso and Ukraine and the standard STATCAP template. In accordance with procedures for APLs, each subsequent operation will be circulated to the Executive Directors for information after approval inprinciple by Management (RVP). Management approval will become effective 10working days thereafter; any operation can be scheduled for discussion at the request o f at least three Executive Directors during the 10-day period. Eligibility criteria for entry to the STATCAP program are as follows: The preparation o f a Statistical Master Plan. This would typically be demonstrated by the existence o f an approved Statistical Master Plan, prepared and owned by the country with broad stakeholder involvement, and including financing from the national budget. The Master Plan should include the normal cycle o f statistical operations, such as a household survey program, andpopulation and other censuses. 4 STATCAP is designedas a horizontal APL to make investmentsinstatistical capacity easier and more effective. It was approved by the Bank's Board in March 2004. A STATCAP project is appraisedand prepared for approval at the regional Vice Presidentlevel following normal provisions for investment lending. 4 National commitment and leadership to have a strengthenedstatistical system and use its outcomes to better design and manage policies, programs and resource allocation. Evidence o f this might be demonstrated by the existence o f a national champion o f sufficient stature to act as an advocate for the use o f statistical data and to provide leadership to oversee the implementationo f the Statistical Master Plan. Willingness to complv with good statistical practice. Countries will be eligible ifthey subscribe to the IMF General Data Dissemination System, or are committed to adopting the Special Data Dissemination Standard. Participation in global development and monitoring activities. Countries will needto demonstrate the willingness to use o f statistical data indeveloping and monitoring Poverty Reduction Strategies or the attainment o f the MillenniumDevelopment Goals, as an indicator o f government commitment to use statistical information for making policy decisions and monitoring. Use o f sustainable implementationarrangements. An eligible country will needto put in place acceptable management, financial, procurement and regulatory arrangements for Project implementation and implementationo fthe Statistical Master Plan. C. Projectdevelopmentobjectiveand key indicators The main objective of the project is to improve efficiency and effectiveness o f the national statistical system o f Mongolia to enable it to provide relevant, timely and reliable data for evidence-based policy making in support o f Government's MDG-based National Development Strategy (NDS). The main beneficiaries o f the project outcomes are the NSO, the Government and the general public o f Mongolia as well as international development partners. The principal outcome o f this project will be an improved national statistical system that can inform the Government's decision-making process by providing timely and accurate economic and social data. It will also help Government monitor progress towards national development goals, including the NDS goals. The specific outputs o f the project are: improved institutional framework that will encourage statistical development; improved IT infrastructure; strengthenedhumanresources through training instatistical operations; improved statistical infrastructure through application o f internationally accepted methodologies and data quality standards; developed statistical production system that continuously adapts to evolving needs o f the society and economy through user-producer dialogues; institutionalizedcore statistical activities, including poverty monitoring; increased output o f reliable statistics by consolidating and strengthening existing surveys and administrative sources, and by designingand conducting new data-generating activities; and timely dissemination, information-sharing, and the use of data for policy decisions. Achievement o f the specific objectives o f the project will support the overall goal by reducing the cost o f information supply, increasing the demand, and making coordination o f statistical activities, financing, and execution more effective. It will also help statistical agencies in line 5 ministries through improved institutional interaction between statistical agencies and training o f their relevant staff. These objectives are in full agreement with the NSDS. Key performance indicators include the following: 0 User satisfaction rates have increase by at least 60% by the Closing Date; 0 By the Closing Date, targeted statistical products are easily accessible inrelevant media, with metadata and interpretationo f findings; 0 By the Closing Date, internationally accepted statistical techniques incollection, complication and authenticity verification are applied by the Recipient, and regular validations are carried out for data sources and statistical products; and 0 By the Closing Date, statistical outputs are releasedina timely manner inaccordance with internationally accepted frequency andtimeframes. Baseline data will be based on existing information provided by the NSDS and will be updated in the first year o f the project. D. Project components The NSDS is aimed at achieving all the target outcomes - they are all important - while recognizing that some may require or merit more effort than others. It comprises four major strategic directions. The general focus i s on building general infrastructure, both statistical and physical, rather than on individual program enhancements. This will position the NSO to respond quickly and effectively to the new needs and priorities that will undoubtedly arise inthe future but cannot be foreseen at present. This focus does not preclude further development of individual survey programs - indeedthe project specifically embraces such improvements. The Project will be carried out under Phase I-b o f the Statistical Capacity Building Program (STATCAP) APL. Mongolia has met all requirements o f STATCAP and the project components are designed to support the implementation o f the NSDS, and will be implementedina coherent, consistent and well-sequenced manner. The major components o f the project are planned as (a) Improving policy, regulatory and institutional framework and the organizational structure o f the statistical system, (b) Strengthening the statistical infrastructure (c) Upgrading statistical operations (improving individual subject matter programs and methodologies as well as the existing data outputs), (d) IT Infrastructureand Equipment, (e) Project Management. A. Improving policy, regulatory, and institutional framework and the organizational structure of the statistical system The statistical system o f Mongolia is centralized. The NSO is charged with managing official statistics and coordinating activities inthis field. The B o M functions independently inthe area o f monetary and banking statistics, and the MoF compiles budget statistics as part o f its operations. Line ministriesand other agencies produce two types of statistical information. One is collected for the NSO on the basis o f methodologies and questionnaires that must be approved by NSO, and that appear in the annual Statistical Action Plan. The other kind is collected for the line ministries' own needs, using methodologies and questionnaires that must be reviewed and discussed with NSO. These statistics do not appear in the Statistical Action Plan. The agencies often publishdata summaries themselves. Measures to strengthen human resources and review and improvement o f organizational structure o f the national statistical system are also considered under this component. The aim i s 6 to improve all aspects o f human resource management. More specifically, performance management, career development and staff assignment programs will be developed and implemented. More proactive and coordinated recruitment procedures will be put inplace. The target i s to improve the qualifications o f the personnel in all statistical offices o f the national statistical system. Training will be provided in basic and advanced methodologies and techniques, particularly those that support the priority indicators for NSDS. Training should be in the form of seminars abroad and inthe country, consultancies, andon thejob training. There will also be substantial opportunity for staff to go on study tours and to participate in international seminars. Meanwhile, this component will also support the design o f a training strategy and the establishment o f national training center for the entire statistical system; so training activities withinthe system can be strengthened and coordinated. Al. Review and improvementof existinginstitutional framework Expected outputs will be the development o f relevant terms o f interaction among the Recipient's institutions and agencies for the production, use, exchange and disclosure o f statistical information. A2. Improvingthe relationship betweendata users and producers It will begin with segmentation and analysis o f users according to their functions and data requirements, for example segmentation into government, industry, academia, media, international organizations, and the community at large. It will establish the demand for statistics working with users. It will inform users and potential users about the statistical programs and the data available. User surveys o f needs and levels o f satisfaction will be conducted. Media conferences will be held more frequently. The Statistical Council will become more active. A3. Improvingthe data disseminationfunction and procedures This sub-component will address the problems in data dissemination. NSO will work to give a wider range o fusers an easy access to statistics by improving publications andthe web site. A4. Strengtheninghuman resource capacity This sub-component will aim to develop a human resource management framework with an incentive structure to retain and attract qualified professionals and managers in the national statistical system. Establishment o f the National Statistical Training Center will also be supported under this sub- component. The training center will also have a library that contains all relevant documentation inelectronic andhardcopy format. A5. Review and improvement of organizational structure of the national statisticalsystem To adopt a more efficient and effective territorial structure for the development statistical system, it is necessary to review the regional office structure and make adjustments where needed. This could take some time to achieve, but coupled with the introduction o f an integrated processing system and more training o f regional staff it could be accomplished. The volume and quality of data collected will be maintained throughout the reorganization. B. Strengtheningthe statisticalinfrastructure 7 In broad terms, the aim is to enhance key elements of the statistical infrastructure - registers, classifications, standards and methods. More specifically, the Business Register will be enhanced through better identification o f inactive enterprises and improved coverage o f large and complex enterprises. Registers o f Populations and housing will be designed and implemented. Key national classifications will be brought into alignment with the international versions and a data element dictionary and a glossary will be created. Questionnaire design expertise will be expanded and design standards will be formulated and applied. Sampling skills will be enhanced and selected full coverage enterprise surveys will become sample surveys. Seasonal adjustment and time series analysis methods will be introduced. More precisely, the following actions are envisaged to be financed under this component: (i) improvement and updating o f statistical registers; (ii) further development and improvement of classifications and other standards; (iii)further development and improvement o f sampling methods; (iv) improvement o f skills in seasonal adjustment; (v) improvement o f skills in evaluating and improving data quality; (vi) improving questionnaire design procedures and developing Master Questionnaire. B1. Improvementandupdatingof statisticalregisters Statistical registries (business, population, housing and agriculture) constitute the basic instrument for the surveys of the economy including enterprises and individual proprietors. According to the Law on Statistics "the authorities who register legal bodies shall report necessary information and changes and revisions in the record o f state registration for legal bodies to the National Statistical Office." This gives the NSO the overall responsibility o f establishing and maintaining these registers. Inmany countries the PopulationRegister is the mainsource of current demographic statistics in place o f current estimates that are based on aggregate census results updated with statistics on births, deaths and migrations. Ultimately the census o f population may be replaced by the populationregister supplemented by a suite o f surveys to fill data gaps. Currently the population register i s being maintained by the State Civil Registration Center (CRC), a state owned company, and NSO has no access to the database. This sub-component will support the access to CRC database and will provide necessary tools for establishing secure links. Another important register i s the Housing (dwelling) Register. The aim i s to create and maintain a statistical Housing Register. In addition to being a source o f statistics about dwellings, a fully up to date housing register will provide the information required to construct frames for household surveys. Currently the NSO does not have an Agriculture Register. Establishing on will help designing sample surveys in agriculture and will significantly reduce the cost of data collection. The aim i s to create and maintain agriculture register. B2. Further developmentand improvementof classificationsand other standards Harmonization o f national classifications with international standards i s a requirement to ensure improved quality o f the national statistics system and especially to provide comparability with international statistics. The use o f standard classifications i s vital for interpretation and integration o f data. The improvement o f classifications has two major aspects: support and development. Support for a classification covers training o f users inthe meaning and use o f the 8 classification and building a suite o f resolutions to ambiguities inthe classificationinresponse to requests from users. Development covers creation and introduction o f new classifications as well as the revision o f existing classifications to ensure that they remain in line with the international classifications. Newly developed or revised classifications have to be accompanied by support for the survey areas inswitching from the previous versions. Given the broad range o f national classifications currently available, the major development effort over the next few years will be in their revision. Inparticular, it will include work on the national versions o f the Classification o f Economic Activities (NACE) and the corresponding Classification o f Products by Activity (CPA). Keeping track o f the definitions o f the data elements used in the various data sets collected and disseminated i s important for integration purposes but has been mostly neglected at the NSO. There i s presently no comprehensive glossary o f statistical terminology within the NSO. To ensure clarity a multilingual glossary will be developed as a component o f the metadata repository. B3. Furtherdevelopmentandimprovementof samplingmethods The advantages of a sample survey over a full coverage survey are the reduced costs and respondent burdenand the increased potential for intensive follow up o f non-respondents and for editing o f anomalous or missingvalues. NSO staff have already leamed some sampling skills from various training programs, but the problems remain. The major problem i s the lack o f experience in designing samples for Mongolia. Thus, primary aim o f this sub-component is to introduce sampling in place o f full coverage surveys wherever feasible. B4. Improvementof skills inseasonaladjustment Time series o f statistical results should be as long as possible. But to produce the long time series, it i s necessary (i) provide methodological consistency o f results over the time period; to (ii) estimatethediscreteindicators ratherthencumulativedata; (iii) providetheseasonal to to adjustment for the sub-annual statistics; (iv) to implement the regular revision o f previous results whedif more accurate results are estimated; (v) to use adequate deflationtechnique and indexes. Seasonal adjustment i s especially needed to prepare data for use in quarterly national accounts. To improve the underlying sub-annual data, NSO needs to convert all sub-annual data preparation to discrete periods (months, quarters) instead o f publishing cumulative estimates, as has often beenthe case. B5. Improvementof skills inevaluatingandimprovingdata quality Data quality audits are needed as a basis for improving data quality. NSO has little experience in dealing with data quality issues. N o attention has yet been paid to the problem o f non-response and how to adjust for it. Validation procedures are minimal and rudimentary. A working group will be formed, perhaps including a staff member with strong management skills to assist in the "change management" that will be involved in facilitating the introduction o fprocedures for self- and peer review. A basic problem inhibiting improvements indata quality is that the field staff is still very close to the administrative functions o f local government, as a result o f which they find it difficult to 9 separate their own statistical duties from the administrative duties o f general government. To deal with this problem, NSO will needto provide training and guidance to local officials. B6. Improving questionnairedesign procedures and developingMaster Questionnaire A questionnaire design unit will be established to designthe Master Questionnaire with modules for all relevant sectors and to ensure consistency. Centralized design o f the master questionnaire and their monitoring i s very important for integration. As a rule, corresponding sections o f statistical agency will be responsible for the content o f the master questionnaire and work in cooperation with functional divisions, especially with those working with the methodology, survey structure and data processing. In designing the master questionnaire, it is important to ensure that all necessary requirements regarding the integration o f indicators, efficiency o f data entry and processing are satisfied. Further, it should be designed in a language easily understandable by respondents, thus minimizing mistakes intheir answers. C. Upgrading statistical operations (improving individual subject matter programs and methodologiesas well as the existing data outputs) The aim is to enhance all individual surveys and administrative data collections through re- engineering and/or continual improvement, taking advantage o f new infrastructure and further incorporating international standards and best practices. This component will address the adaptation o f internationally accepted standards and methodologies in data collection, compilation, and validation by NSO and other relevant agencies. It will also support a thorough review and inspection of existing data outputs. It is essential to re-examine the coverage and content o f data outputs and the corresponding data inputs in each subject matter area. Starting with the revised SNA93 data requirements as the core, the content o f economic statistics program should be reviewed and rationalized with the aim o f reducing the amount o f detail collected. This will be done by identifying and eliminating any indicators that seem inappropriate for a market economy and no longer needed, or that are not published. This will not only release NSO resources for other activities but also reduce respondent burden. It will also support further development o f sectoral statistics. C1. Fullimplementation of SNA This sub-component will aim to produce national accounts that are timely, reliable and in line with internationally accepted methodologies. C2. Price statistics(including PPI, CPI and other relevant indices) The aims o f this sub-component are to improve the calculation o f Consumer Price Index (CPI), by enlarging the basket o f goods covered and by upgrading methodology; introduce a customized program for the calculation o f CPI by location and for the nation and Improve the calculation o f the Producer Price Index (PPI) by enlarging the basket o f goods covered and by upgrading methodology andprepare PPI for major sectors. C3.2010 Census preparation This sub-component will focus on the main preparatory tasks identified inthe framework o f the run-upto the 2010 Census and will addressthe following tasks: Census Mapping. Preparation o f Census training plan and program. 0 Training o f trainers 10 Training o f managers, supervisors, and enumerators Providing equipment and software and training for the preparationo f census. D.IT Infrastructure and Equipment Enhanced IT infrastructure and equipment are needed to implement the reforms envisaged inthis Project. This component will support NSO's strategic goal o f improving efficiency and effectiveness in data collection, analysis, and dissemination processes through the use o f information technology. To achieve this goal a detailed IT plan will be prepared, which includes such key elements as functional requirements,technology architecture, and system maintenance and support plan. It will also encompass a diagnostic review o f IT solutions and IT competences in all data producing agencies including the NSO (central and regional offices), statistical units in line ministries and statistical units in Customs and Tax Offices. Inaddition, the consultancy service will support the preparation o f bid documents that will ensure the effective implementation o f business process changes introduced inthe Project. The proposed IT plan will help creating an IT network for the statistical system that will efficiently and effectively link the central office with the regional offices. It will also provide a unifiedinformatioddata space to carry out all information flows and other services necessary for the entire national statistical system. The implementation of the IT plan will become one of the major components o f the proposed project. Investmentsinhardware and software will be made as specified inthe IT Plan. D1.Preparation of an IT plan This sub-component will support the development o f a detailed computerization plan for the national statistical system that will address a thorough upgrading o f the IT solutions and IT competences in all data producing agencies including the NSO (headquarters, and regional offices), statistical units inline ministriesand statistical units instate-owned enterprises. D2.Establishmentof a IT network for the national statisticalsystem This sub-component will support upgrading existing information technology (IT) and other equipment that is essential to carry out existing and project activities and networking equipment: A thorough upgrading of the IT infrastructure and IT competences is needed to improve efficiency and ensure staff learn the new technologies and adapt to the new methods. InvestmentsinIT, licensed software, and technical assistance will be provided to data producing agencies including the NSO (headquarters, and regional offices), statistical units in line ministriesand statistical unitsinstate-owned enterprises. E.ProjectManagement NSO will be the main executing agency o f the project and will be responsible for its management. To effectively carry out the implementation and daily project administrative work a financial management specialist and a procurement specialist will be hired by the executing agency. Specifically, this group will ensure compliance with the procurement, disbursement and financial management policies and procedures. Technical Annex 4 contains detailed descriptions o f each component. 11 At the current level of funding the project will focus on agreed priority areas that are described above and in Annex 4. These priority areas were based on the NSDS and had been identified by the recipient after discussions with all stakeholders at the consultationworkshop. The project team has been communicating with donors and development partners to obtain additional funding. Once these funds become available, the project will include relevant sub- components Improvement o f statistical operations, including methodologies and data outputs, for the following areas. a Non-observedeconomy a Migration statistics a Industrial statistics 8 Investment and construction statistics a Environmental statistics a Agriculture Statistics a Information, Communication and Transportation Statistics a Demographic Statistics a Labor force statistics a Domestic Trade Statistics on Goods and Services trade statistics a External Trade Statistics on Goods and Services trade statistics a Justice and crime statistics a Tourism statistics a Social Statistics, Poverty and living conditions monitoring statistics Further,this stage will also involve extendingthe ITnetwork to regionaland local offices. E. Lessons learned and reflected inthe project design The most important lesson learned from previous assistance (including TFSCB) is the need for a more systematic approach, as inthe NSDS, instead o f the piecemeal approach that was the case earlier. Statistical capacity building requires integrated and coordinated support that could take a long-term commitment. Previous experience from Mongolia and other countries demonstrated that fragmented and uncoordinated capacity building activities do not result in sustainable improvements in statistical production and dissemination. Given that this project i s based on NSDS, it ensures that support will be provided to the whole national statistical system in a coordinated way. The project will also support specific measures to strengthen coordination, collaboration, networking, and information sharing among stakeholders. Another important lesson learned from previous capacity building project i s that projects are often not sustainable once external support stops. This project emphasizes the ownership by the government and close coordination between all stakeholders. Further, this project focuses on strengthening institutional framework, improving human resources, and building necessary physical and statistical infrastructure. This will ensure that appropriate allocation from the budget and investments will be provided for the statistical system with the active involvement o f a wide range o f users and producers. As a result, new demand for high-quality data, stimulated by training, producer-user dialogue, and data dissemination, will provide an additional impetus for sustainability. 12 The experience from the implementation o f the previous statistical capacity building project funded by the TFSCB demonstrated that projects in Mongolia can be implemented without creating a stand-alone project implementation unit. In the case o f current project, the implementing agency, NSO, is very much committed and motivated that allows going for the "no-formal-PIU" option. However, given the still existing capacity constraints a small project coordination team consisting o f local consultants will help relevant NSO staff in such project implementationissues as procurement, financial management and disbursements, monitoring and evaluation. Another important lesson worth mentioning i s the twinning issue. Experience from various statistical capacity building projects implemented in other countries showed that a twinning arrangement between NSO and a well developed national statistical office (or a consortium o f such offices) could be a better approach instead o f hiring several consulting firms or individual consultants. Inthe long-term this could allow building lasting partnership that can go beyond the project life. The MAPS (Marrakech Action Plan for Statistics) Advisory Board' recommended greater use o f statistical offices o f developed countries through a twinning mechanism to help reduce the risk o f implementation o f capacity building projects that could be constrained by the lack o f expertise and technical assistance. The Board also recommended raising this issue within the context o f the OECD Statistics Committee and through EU within European statistical offices. F. Alternatives considered and reasons for rejection There are three likely alternatives to the project that were considered during preparation. These are: Providing support through a series o f interventions aimed at improving specific areas o f statistics funded by various donors and international organizations. This was rejected because as discussed above piecemeal approaches do not provide sustainable solutions. Instead, all areas o f the NSS need to be improved in a systematic and coordinated way. Supporting the implementation o f the NSDS ensures that the approach i s country owned and country driven, and that activities are well coordinated and well sequenced. Providing support for only NSO instead ofwhole statistical system i s another approach that was rejected because improvements are needed in all parts o f the system, including line ministriesand other producers and users of statistics. Another approach considered during the preparation i s to provide support through existing World Bank projects and programs. This was rejected because creating statistical capacity under individual sector specific projects would limit the improvement in a particular area and would be no different than the piecemeal solutions. Regardless o f the outcome o f this approach improvement o f the national statistical system would be delayed. MarrakechAction Planfor Statistics, Minutes of the first meeting of the Advisory Board, October 26 and 27,2005, Washington, D.C. Chairedby Jim Adams, Vice President,Operations and Country Services, World Bank. Document is inthe projectfile. 13 111. IMPLEMENTATION A. Partnershiparrangements IDA has formed partnerships with donors and development partners to help the National Statistical Office o f Mongolia implement the project. Republic o f Korea (through Korean Trust Fund)will be the main contributing partner inthis project. TFSCB will also provide support for the project. The Turkish International Cooperation Agency (TICA) will support the project through in-kind contributions in the form o f training in various areas o f statistics in Turkey, short-term experts and some goods for the training center and printing facility. The implementation o f the project will be coordinated and monitored by all partners through a joint mid-term review. EC and Japan have expressed their interest in supporting the project and the project team i s still communicating with them for their possible contribution. The team has been coordinating statistical capacity building/technical assistance efforts and proposed project components with UN/UNDP, UNICEF, IMF, ADB and FA0to avoid duplication and to increase the effectiveness o f the implementation. B. Institutionaland implementationarrangements NSO will be the main executing agency o f the project and will be responsible for its overall management and implementation. To effectively carry out the implementation and daily project administrative work, there will be a project coordination team (PCT), headed by a qualified and experienced Project Coordinator, consisting o f NSO staff that will be assisted by a financial management specialist and a procurement specialist (and an assistant) to be hired by the NSO. Specifically, this team will coordinate project activities, manage reporting and auditing activities and ensure compliance with the procurement, disbursement and financial management policies and procedures. All other aspects of the project would be implemented by relevant NSO staff with the assistanceof local and internationalconsultants. It is important to note that the project coordination team will not be a PIU as it is the case in many other projects, instead a seamless approach of not having a PIU will be adopted. The PCT will be using the existing financial management and procurement system of NSO and will be assisting relevant NSO staff in implementing the project. This i s in line with the directions provided inthe Paris declaration and the Bank's policy on project implementationarrangements. Given the fact that the project is aimed at improving the statistical system o f the country it is necessary to obtain appropriate level o f commitment and support o f various government agencies and ministries. In order to ensure this, the National Statistical Council (NSC) will take the oversight responsibility and monitor the project implementation. The NSC consists o f seven members from Parliament (State Great Hural), government, scientific research institutions and NSO headed by the current Chairman o f NSO. The members o f NSC are appointed by the Parliament. It will meet twice a year and perform the following key functions regarding the project implementation: 0 Ensureefficient interdepartmental (inter-ministerial) interaction and resolve interdepartmental (inter-ministerial) issues; 14 Exercise monitoring and evaluation o f project progress on a semi-annual basis and propose improvement recommendations where needed. C. Monitoring and evaluation of outcomes/results To track progress towards the desiredoutcomes, the project coordination team will assist NSO to regularly monitor a set o f intermediate results indicators in accordance with the results framework specified in Annex 3. An internal Review and Monitoring Committee (led by the Deputy Chairman, 3 Department heads and the PCT staff) will be established to monitor project outputs and outcomes. The review committee will meet at least once a month during the implementation and report to NSO management. The benchmarks for these indicators will be obtained from the NSDS and will be checked with the results o f a baseline survey to be undertaken during the first year o f the project implementation. NSO will monitor implementation o f the project through quarterly financial management reports and annual audits and other reports on semi-annual basis. A joint midterm review will be carried out by the government and development partners about two and a half years after the project becomes effective (FY2011- 12). This will provide an in-depth assessment o f progress towards to desired project outcomes and will recommend measures to reorient the project if needed to ensure that it will achieve its objectives. Two months before the project closing date, the project coordination team will prepare and provide to IDA a report on the execution o f the project, its costs and the current and future benefits to be derived from it, to be attached to IDA'SImplementation Completion Memorandum (ICM) inaccordance with IDA guidelines. A set of indicators o f statistical capacity building developed by the PARIS 21 consortium will be usedto develop a monitoring baseline and for regular project'monitoring. These indicators will be supplemented by information from the baseline survey mentioned above and other sources, including surveys o f users o f statistical products, an independent assessment o f statistical products against the master plan, audits o f management, staff, facilities, human resource training and records. Giventhe magnitude o f spendingassociatedwith ITunder the project, NSO agreedthat the PCT would monitor progress o fthe IT investmentsinterms o f cost and schedule. These are two key indicators o f statistical agencies with regard to implementingIT.Variances incost and schedules o f IT will be reviewed at mid-termo fthe project. D. Sustainability The recipient has shown a strong commitment to strengtheningthe capacity o fnational statistical system and has demonstrated its readiness to work on the project by preparing the NSDS. Endorsement o f the NSDS by the National Statistical Council and its adoption o f by the NSO i s also an indicator of strong ownership. Further, the Government has subscribed to the IMF's General Data Dissemination System (GDDS), which provides guidelines for the production and release o f statistical data. This i s another indicator that the Government i s committed to improving the national statistical system. The proposed twinning arrangement could also become an important factor in ensuring project sustainability . The twinning partner, a well established statistical agency or a consortium o f agencies can provide a systematic and programmatic assistance to NSO in capacity building. In 15 the long-run, NSO could become a twining partner (possibly in tandem) for other statistical offices o f the region. Another important indicator that will ensure sustainability i s the development o f better user producer dialogue. By developing the users-producers dialogue and through the improvement o f the data quality in the NDS and MDG context, the project will also increase the demand for statistics within the Government and the civil society. Sustainability o f this project would largely depend on the Government's future commitment to provide budgetary support to the statistical system. By approving the NSDS and including the project in the National Strategy for the Development o f Statistics o f Mongolia, the Government committed to allocate necessary budget to support the national statistical system over a period that would go beyondthe lifetime o fthis project. Sustainability o f IT investments depends on adequate operation and maintenance o f hardware, systems and software. It should initially be noted that, at whatever its level o f funding inthe past decade, NSO has with limited resources skillfully and efficiently maintained its existing equipment base. Most of this equipment has lasted to the end o f its depreciation cycle and far beyond. Sustainability o f the IT investments will be promoted by trying to keep down projected operation and maintenance costs. Detailed design and procurement specifications will take into account future operation and maintenance costs including extended warranties (possibly 5 years for servers, 3 years for workstations, and software licenses that will provide the latest upgrades). E. Criticalrisksand possiblecontroversialaspects Rating of Riskfactors Descriptionof risk Rating of risk Mitigation measures residual risk I.Countryand/orSub-NationalLevelRisks 11. Sector Governance, Policies and Institutio i Sector Specific 1Lack of political support Substantial National fbnding has increasedin Moderate Risks (General and commitment fora recentyears, but this is insufficient public admin. modem statisticalsystem, to upgrade performancewhile still sector) by not providing adequate maintaining all ofthe older statistical legal, administrative or activities. Hence, aparticular budgetary conditions. challengewill be to maintain the political support for better official statistics. One way of ensuring sustainability is to provide better outputs,which can be achievedby improving the dialog betweendata producersand users. NSO and the other main partnersofthe statistical system will needto improve communicationswith users, to build credibility and to focus on providing outputsthat meetthe needs of users. Further, linkingthe project closely with NDS and MDGs as well as with other ongoing andplannedprograms will create continuing demand for betterdata. 16 Endorsementof the NSDSby the National StatisticalCouncil and its adoption of by the NSO is also an indicator that these potential risks could in fact be mitigated. 111. Operation-si cific Risks Technical Design Lack of externalfunding - Substantial The task team has been Moderate and lack of effective communicating with EC and Japan coordination among for co-financing. Meanwhile the developmentpartners team obtained co-financing grants from Korean Trust Fund and TFSCB. Signing a Memorandumof Understanding(MoU) among development partners and donors is also an option that clearly identifies relevant activities with proper sequencing and clear responsibilities to all involved parties will make sure effective and efficient coordination. Implementation Resistanceto change and Substantial The task team identified champions Low Capacity And lack of capacity inthe of statistics within country and got Sustainability present statisticalsystem, their support. The team will also due, for instance, to loss of ensure involvement of all competentstaff; stakeholders from preparationto the end of implementation and obtain Government's continuing support. As the implementing agency, NSO has demonstratedthat it has the capacityto carry out statistical capacitybuilding projects andto take the lead intechnical and methodological forums for statistical policy. Implementation of the NSDSwill ensure the improvement of skill of staff and availability of better data inthe short-termby utilizing existing sources. These short term improvementswill bring credibility to the system and ensure sustainability. Social And N/A N/A Environmental Safeguards IV. Overall Risk ncluding Reputational Risl Overall Risk I NO reputational ri : is anticipated. IModerate F. Loadcredit conditions and covenants Management approval condition The PCT has been set up by the NSO including the hiring o f a procurement and a financial management officer. 17 The Project Operations Manual and the Financial Management Manual have been approved and adopted by the Project Implementation Entity in form and substance satisfactory to the Association. Effectivenesscondition: The Subsidiary Agreement has been executed on behalf o f the Recipient and the NSO in form and substance satisfactory to the Association. The financial management officer and procurement officer o f the PCT have completed their training in financial management and procurement respectively, in a manner acceptable to the Association, to ensure compliance with the accounting, monitoring and reporting requirements under the Project. Other Covenants: Maintain the NSC, throughout the period o f implementation o f the Project, headed by the Chairman o f the NSO, with representation from the Recipient's executive branch, the Parliament and scientific research institutions. Maintain throughout the period o f implementation o f the Project, a project coordination team (PCT), headed by a qualified and experienced Project Coordinator, and provided with sufficient resources and competent staff in adequate numbers, under terms o f reference satisfactory to the Association. Establish within the NSO, by no later than one month after the effectiveness date, and thereafter maintain throughout the period o f implementation o f the Project, a review and monitoring committee, headed by the Deputy Chairman o f the NSO, with representation from, inter alia, the three (3) department heads o f the NSO, and staff o f the PCT. Select and engage, by no later than December 31, 2009, the services o f an independent auditor acceptable to the Association, under terms o f reference satisfactory to the Association. Prepare, and regularly update an Annual Plan for the Project identifying Project activities by component and sub-component, and their related expenditures and financing sources; which plan shall be submittedto the Association for review and comments. There are other covenants relating to the subsidiary agreement and other implementation arrangements that are included inthe FinancingAgreement. IV. APPRAISAL SUMMARY A. Economicand financial analyses Economic. The Project i s not amenable to a cost-benefit analysis as national statistical offices have hardly any significant cost recovery. The economic benefits from the project will derive from three main sources. First, improvements in the efficiency o f statistical operations and agencies will result in broader coverage o f and higher-quality data from given levels o f expenditure. Second, better data will enhance the potential for evidence-based decision making, at policy, program and project levels. Third, the project would help address the significant costs o f missing or inaccurate data. 18 Financial. National statistics are a public good and generally financed from tax revenue. There i s only very limited potential for cost recovery, mainly through data dissemination, including sale o f publications and producing "non-standard" reports that require additional human and other resources. Therefore, only marginal financial returns are expected from this project. However, there can be a fiscal impact contributing to a better budgeting process and a potential increase in revenues due to better information and coverage, as well as a possible increase in recurrent costs to cover enhanced operations o fthe national statistical system. B. Technical The technical design o fthe project is basedon a detailed analysis o fthe strengths and weaknesses o f the national statistical systemas provided inthe NSDS developed under the Bank's assistance. The proposed developments inmanagement o f statistical agencies, statistical infrastructure, and statistical operations and the choice o ftechnology are appropriate to the borrower's needs and capabilities, as well as international good practice and standards. The specifications for equipment, including computing, communications and transportation equipment,will be reviewedby technical specialists and will be inline with the World Bank procurement practices and local requirements. C. Fiduciary 3.1 Financial Management Issues. The Financial Management team has conducted an assessment o f the adequacy o f project financial management system. The assessment, based on guidelines issued by Financial Management Sector Board on November 3, 2005, has concluded that the project meets the minimum Bank financial management requirements, as stipulated in BP/OP 10.02, subject to the satisfactory resolution o f the issues listed in paragraph #lo. Inthe FMteam's opinion, the project will have financial management arrangements acceptable to the Bank and, as part o f the overall arrangements that the borrower has inplace for implementingthe operation, provide reasonable assurance that the proceeds o f the IDA credit and grants will be used for the purposes for which they are provided. Financial management risk is the risk that World Bank credit and grant proceeds will not be used for the purposes intended and i s a combination o f country, sector and project specific risk factors. Taking into account the risk mitigation measures proposed under the project, a "moderate" FMrisk rating was assigned to the project at the pre-appraisal stage. 3.2 Procurement Issues. General: Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004 (Revised October 2006); and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 (Revised October 2006), and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loadcredit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. Procurementof Works:No civil works would be required and financed under the Project. 19 Procurementof Goods: A total of US$ 0.84 million worth of goods would be procured under this project, such as IT equipment and computers, office equipment and etc. The procurement will be done using Bank's Standard BiddingDocuments for all ICB procurement. (i) International CompetitiveBidding (ICB). Any contract for goods estimated to cost more than US$100,000 equivalent would be procured under ICB procedures specified inthe Procurement Guidelines. (ii) Shopping. Any contract for goods estimated to cost the equivalent o f US$lOO,OOO or less per contract would be procured under shopping procedures as specified in Para. 3.5 o fthe Procurement Guidelines. (iii) Direct Contracting. Equipment including standard software with proprietary nature and obtained only from one sources or which meet other circumstances as specified inPara. 3.6 o f the Procurement Guidelines would be procured on the basis o f direct contracting. Selectionof Consultants:A total of about US$ 2.23 million worth of consultant services would be requiredunder this project. The consulting services would include Twinning Partnership TA, PCT staff multiple contracts and other ad hoc advisory services. Most services would be provided by consulting firms and some would be provided by individual consultants. (9 Selectionof ConsultingFirms:The consulting contracts expected to cost more than US$lOO,OOO equivalent per contract will use the Quality and Cost Based Selection (QCBS) or Quality Based Selection (QBS) processes inaccordance with the relevant provisions o f the consultant Guidelines.For the selection o f auditors, Least Cost Selection (LCS) would be used. Consultants may also be selected based on Consultants Qualification Selection (CQS) method and Single-Source Selection (SSS) basis. (ii) SelectionofIndividualConsultants:Individualconsultantswouldbeselectedand awarded inaccordance with the provisions of Section V o f the Consultants Guidelines.Individual consultants may also be selected on a sole-source basis, subject to the Bank's prior approval. OperatingCosts:A total of about US$ 30,000 would berequiredfor the project operational cost. These costs are largely related to office supply, translation and training materials printing, logistic cost for workshops and etc. D. Social It is expected that improved national statistical system will lead to improved social services delivery to the population, inparticular to the poor in such areas as health, education and social protection. The project will help improving the statistical capacity o f relevant line ministries and other agencies where applicable inboth statistical issues and evidence-based decision making in the determininggovernment policies andexpenditures. E. Environment The project focuses on institutionalreforms and capacity buildingof the national statistical system within the broad context o f the governance system reform. It doesn't have any direct 20 environmental impact, and the project does not include any civil works. The project i s therefore rated as `(2'. Any minor refurbishmentsof office space requiredfor the installation of equipment that are foreseen under the project will be executed inline with prevailingnational legislation and all bidding documents will make reference to the need to carry out any works inline with prevailing environmental standards and safety regulations. F. Safeguardpolicies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [ I [XI Natural Habitats (OP/BP 4.04) [I [XI PestManagement (OP 4.09) [ I [XI Physical Cultural Resources(OP/BP 4.11) [ I [XI Involuntary Resettlement(OP/BP 4.12) [I [XI Indigenous Peoples(OP/BP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety of Dams (OP/BP 4.37) [I [XI Projects inDisputedAreas (OP/BP 7.60)* [ I [XI Projects on International Waterways (OP/BP 7.50) [ I [XI G. Policy Exceptions and Readiness This project complies with all applicable Bank policies. The Project is entirely consistent with Bank Policy andno exceptions are requested. The project meets the region's readiness criteria. * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties' claims on the disputed areas 21 Annex 1: Countryand Sector or ProgramBackground MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia 1. Country background. Mongolia is a landlocked country between Russia and China with an area o f 1.6 million square kilometers and a population o f 2.56 million. Mongolia i s the least densely populated country inthe world and more than a third o f the population continues to rely on semi-nomadic livestock herding as their primary source o f livelihood, and many more depend on it for part o f their income. However, these ways o f life are changing rapidly, as Mongolia undergoes political, economic, and spatial transitions. Mongolia has been doing quite well in its transition from a planned economy to a market economy since the early 1990s. Mongolia has held four peaceful and fair parliamentary elections since 1992. A framework o f market and democratic laws and institutions has been put inplace, there i s an active media, and a vocal civil society increasingly engages on the political front. The Government has undertaken various fundamental economic reforms and significant progress has been made towards reducing the incidence o f poverty. Even though the reform progress has moved in a "stop and go" fashion during the past decade, it should be noted that the direction o f the overall reform path has been towards a market-orientedeconomy. 2. As a result ofthese developments there have beensignificant in-migrationto urban areas; hence population and economic growth have become increasingly concentrated inthe capital city o f Ulaanbaatar. Eventhough poverty seems declining, still over a third o f the population remains poor. 3 . Recently, the Government o f Mongolia has prepared a National Development Strategy (NDS), which was approved by the parliament that covers an ambitious development agenda with six main priorities to be carried out through 2021. The agenda includes: (i) achieving the MDGs; (ii) developing an export-oriented, hightech, knowledge-based economy; (iii) exploiting strategic minerals to build savings, growth, and modern processing industry; (iv) developing regions and infrastructure to reduce urban-rural disparities; (v) halting ecosystem imbalances; (vi) consolidatingpolitical dtmocracy and an accountable systemthat is free from corruption and red tape. This ambitious agenda i s quite data and information intensive and achieving the proposed goals requires continuous monitoring o f poverty and performances o f various sub- sectors o f the economy for developing policy measures to reduce poverty. This, in turn, requires a well functioning national statistical system. Monitoring and evaluation, based primarily on statistical data, constitute the one o fkey aspects of the strategy that will enable policymakers to: Follow the progress o f the strategy and measure the extent to which objectives are being met duringimplementation; Identify current problems andways to solve them; 0 Update objectives at each stage o f implementation. 4. The transition from a centrally planned to a market oriented economy has brought rapid changes in all areas o f economic and social life o f Mongolia. The social and economic reforms o f recent years have changed the environment inwhich the statistics must function. A system i s now needed for collecting economic information based on structured methods that are used in 22 countries with a market economy. As a result, statistical offices at all levels have been obliged to reform the system o f collecting and processing data and delivering it to users. Therefore since transformation, the nature o fthe tasks o fthe NSO hadto undergo significant changes. 5. Further to the above discussion there i s another important point worth mentioning. It i s the relevance and timeliness o f the project in light o f the ongoing global financial crisis and its implications for Mongolia. It should be noted that during the time o f crisis the need for reliable official statistics becomes most apparent and urgent because o f the well known fact that better decisions could be made if they are informed by good statistics. It should also be noted that the cost of poor decision making during such times could be very high. In that sense the value o f reliable and timely statistics appears to be quite obvious, hence this investment in statistical capacity o f the national statistical system seems quite timely. There are certain emerging needs as a result of the financial crisis such as good quality and reliable data on National Accounts and price statistics that are included as priority areas inthe project. Further, the project focuses on the improvement o f the fundamentals o f the statistical system that are necessary to produce relevant, reliable and timely statistical data on their own. Improving dialogue between statisticians and policy makers as well as other users; and improving analytical capacity o f both producers and users inusing already existing data will help the government incrisis management. 6. Sector issues. Before 1990, the Mongolian statistical system was organized in a manner typical o f command economies, with main reliance on compulsory submission o f administrative reports by enterprises. In 1990, the Central Statistical Office was reorganized as the National Statistical Office (NSO), just at the time when Mongolia had begun to shift to parliamentary government and a market economy. 7. The first Law on Statistics o f Mongolia adopted by State Great Khural in 1994 and revised in 1997 and 2004. As a result, the official statistics and administrative statistics were distinguished and precisely determined, statistical data set, and coverage revised, and frequencies and contents o f censuses and surveys updated. Moreover, the functions o f statistical professional services, sectoral ministries and agencies, regional administrative offices and enterprises, which produce statistical information were defined and was possible to regulate their relations within relevant legislations. The law includes provisions for all statistical agencies o f Mongolia but assigns NSO the leading role inproduction and dissemination o f statistical information. The Law on Statistics was further amended in January 2008 that clarified the roles and responsibilities o f NSO and other government agencies dealing with statistics. 8. Since the early 1990s the NSO has started introducing internationally accepted methodologies. In 1994, Mongolian Government passed 94th Resolution and approved Program in order to intensify the works of conforming statistical indicators and methodologies of the country to international standards. It was basically implemented from 1994 to 1997. Conducting 1995, 1998 and 2003 Living standard measurement surveys incollaboration with UnitedNations Development Program was a significant work presenting reliable information on the minimum subsistence level o f the population. The NSO has also compiled the Input and Output Tables and Supply and Use Tables for 2000 and assessed the basic parameters o f economy such as macro- economic balancing, structure and balancing relationships, and created database, which have been useful for the government policy making on economic and social development and implementation actions. 23 9. Another major initiative led by the Government i s the monitoring o f Millennium Development Goals, which gave additional responsibilities to NSO. In order to provide a basis for the monitoring o f MDGs the NSO has been cooperating with all relevant public institutions, as well as with international agencies. In2004, the first national MDGreport, Implementation of the Millennium Development Goals in Mongolia, was issued under coordination from the Office o f the President and the Ministry o f Foreign Affairs. The report contained 21 goals for Mongolia based on the 48 generic indicators proposed by the UnitedNations. On 21 April, 2005, the State Great Hural, with Resolution Number 25, approved Mongolia's participation in the Millennium Development Goals, and endorsed a set of 24 quantitative goals, specifically tailored for Mongolia, to be achieved by the year 2015. NSO was tasked with establishing "the statistical indicators for measuring the progress towards the providing the MillenniumDevelopment Goals incollaborationwiththe relevant professionalorganizations". 10.Inpreparation for the adherence o f Mongolia to the General Data Dissemination Standards (GDDS), the IMF in May 2000, applied its Data Quality Assessment Framework (DQAF) to seven datasets, o f which four (national accounts, the Consumer Price Index (CPI) labor market indicators, and various social and demographic indicators) are produced at the National Statistical Office (NSO). Another two datasets, the balance o f payments and monetary statistics, are produced at the Bank o f Mongolia (BoM), while one, the government budget, i s produced at the Ministry of Finance (MoF). Data from the Ministry of Health and the Ministry o f Education, Culture and Science (MECS) were also reviewed. The review process led to a number o f recommendations. Inthe wake o f this assessment, the IMF accepted Mongolia for the GDDS in May o f 2001, with NSO as the lead agency and with the participation as well o f the B o M and the MoF (thenthe Ministry o f Finance and Economy). 11. In 2003, the Government finalized the National Poverty Reduction Strategy in the form o f the Economic Growth Support and Poverty Reduction Strategy (EGSPRS). Deriving from the EGSPRS, the Government adopted the National Action Plan for 2004-2008 and developed the longer-term National Development Strategy. Two components are prominent in the Government's strategy: higher, stable, private sector-led growth to improve living standards and reduce income disparities; and social development to improve income opportunities and the quality o f public services and access by the poor. The strategy sees enterprise privatization, development around the mineral endowment, small and medium business promotion, infrastructure development, and legal and institutional reforms as key to growth. It enumerates financial sector priorities to support growth. Towards its social goals it targets education and private sector growth to generate employment and increase incomes. Improved access to health care (particularly maternal and child health services and primary health care), schooling, urban services, and housing are immediate targets. 12. So far the national statistical system in general and the NSO in particular have made significant improvements with the help o f various donors and development agencies6, however the national statistical systemas a whole still needs improvements ingeneral, and incertain areas where the project's involvement could make a significant difference. The Bank provided a grant from Trust Fund for Statistical Capacity Building (TFSCB) to the National Statistical Office o f Mongolia (NSO) in 2001 to develop a Statistical Master Plan (SMP) among other statistical For more details see Mongolia: National Strategy for the Development of Statistics, December 2007 sections 1-2 24 capacity improvement activities. The project was completed in June 2004 and the SMP was approved by the State Great Khural (Parliament) in January 2006. Recently, the NSO has received a small grant from the Bank (TFSCB) to prepare the National Strategy for the Development o f Statistics (NSDS) that updated the SMP along with a financing strategy for the implementation o f it. The NSDS was completed and discussed at the stakeholders' consultation workshop in October 2007. Following the workshop the NSO submitted the NSDS to the National Statistical Board, which has approved the updated NSDS and new action plan in December 2007. The NSO has adopted this updated NSDS and action plan inorder to implement it. Based on these developments the Minister of Finance has sent an official letter to the Bank requestingassistance for the implementationo fthe NSDS. 13. The proposed project to implement the NSDS i s in line in with the major pillars o f the current ISN and has been included in it as part o f supporting the government to implement "second generation" reforms where the Bank can assist the Government in strengthening the national statistical system to produce reliable, timely and quality data for monitoring o f key poverty and development indicators. The outputs o f this project will help sustaining achievements o f the I S N pillars in the mid to long term. Meanwhile, to build on what has been achieved and to avoid duplication the project team i s closely coordinating with Governance Assistance Project that has a component on "Capacity Building for Data Transparency and Data Access for Poverty Monitoring" as well as with the Economic Capacity BuildingTA project. 14. Even though NSO has been trying to adopt standard international statistical methodologies and to remove old management structures, this transition has posed major challenges for NSO. For many decades prior to independence, statistics simply operated to trace the implementation of the government's economic plan. The dramatic changes inthe economic environment and the necessary adoption o f techniques and procedures to monitor economic movements have exceeded the adaptation capability o f the agency. 15. As a result, there i s now an increasing pressure on the national statistical system to produce and disseminate relevant statistics that meet internationally accepted standards. The critical issues to be addressed are: Weak institutional capacity and inefficient organizational structure o f the statistical system hinder undertaking efficient statistical operations. Ineffective institutional coordination between various statistical agencies and the NSO and lack o f an effective dialog betweendata users and producers create discrepancies betweendata supply and data needs. Lack o f well developed human resources framework and properjob definitions prevent upward mobility and hence reduce the incentives for the staff. Inadequate analytical capability and qualifications o f personnel o f the statistical system preventadaptation o f advance methodologies andtechniques for collection, analysis and dissemination o f data as well as the use o f existing economic and social data 7The NSDS provides a road map for the next five years and implementation of it will significantly improve the capacity of NSO and other agencies that will be responsible for data collection and dissemination and monitoring and evaluation. It was developedby NSOwith a TFSCB grant. 25 Weak statistical infrastructure hinders institutionalizing the core statistics the national statistical systemproduces, such as censuses and surveys. Weak physical and IT infrastructure reduces efficiency ofthe systemand creates significant time lag between data collection and dissemination. 16. This project will strengthen the capacity o f the national statistical systemto generate reliable, timely, and relevant statistical data to support and monitor development and poverty reduction. The results o f the project will include a better legislative framework for statistical work, and better human skills, better equipment, and better data to monitor progress. The data will be o f benefit to the government and people, but will also be of use to the Bank and other regional and international agencies inmaintaining a policy dialogue with the government and inplanning and implementingother projects and programs. 26 Project Objectives Amt* I.UnitedNations I I A. UNPopulationFund (UNFPA) $1997 1 MON/02/P08 Strengtheningthe NSO 1 Conducteda secondRHS in2003 and $395 to increase availability and disseminatedthe findings ofthe CPH andthe accessibility of reliable population RHS. (the government also contributed MNT 103 data million). 2 Subcomponentof the project (MDG) Poverty, MDG Monitoring and Assessment system $280 support pilot project 3 Capacityto monitor ICPD/MDG-s Building capacity ofplanner and officials to $805 2007-2011(MNG4P103) analyse andutilize pop gender, RHdata, conducting 2008 RHS and support2010 population andhousingcensus B. UNDevelopment Program(UNDP $603 1 Poverty Researchand Employment The methodology of the HouseholdIncome and $500 Facilitation, 2002-04 Expenditure Survey (HIES)was improved & the sampling designrevised. I C. UNChildren's Fund (UNICEF) $443 DevInfo 2004-05. The DevInfo 4.0 software was translated into $10 Mongolian and successfully introduced nationwide. The system is used for storage & - MONEE (Monitoring for Eastern 1Iretrieval of MDG-indicators. - A database template on the status of women, $40 Europe), 2002-04 children andhouseholds, was implementedfor Mongolia. Third Multiple Indicator Cluster MICS was conductedinNov-Dec 2005 and a $120 Survey (MICS), 2005-06 workshop ontabulation andreport writing was held inAug 2006. The survey focuses on children under5 & onwomen of fertile age, and includes birth weight & the weights of children under 5. UNICEF paid for 60 % of the cost, while the government paid the other 40 %. Child protection. 0404YS 403-01 A project hasjust begunfor collecting data on the $14 Data and analysis protection of children $140 1 "Promoting decent and productive During 2006, a schoolto work survey $45 work for young women and menin Mongolia" within the ILO/ Korea PartnershipProgram,2006 2 Labor force and child labor survey A child labor module sponsored by ILO was once $47 (P.270.13.335.050)during 2006-07 again included with the Labor Force Survey (LFS), sponsored by ADB. E. Food and Agriculture Organization (FAO) 27 Strengtheningcapacity for the Projectdesignfor preparationof Census of Amt improvement of agricultural statistics Agriculture hasn't service(Phase 1-planning for a been national agriculture census) decided yet F.Economicand SocialCouncilfor $38 a and the Pacific (ESCAP) Disability QuestionSet Testing, 2005 In2005, pretestingahealth anddisability statistics $5 questionnaire Developmentaccount project At this time, ESCAP is assistingwith a special $33 (Interregional Cooperationof the module for the informalsector, to be attachedto Measurementof Informal the labor force survey during 2007-08. Employment) 2007-08 Importing access to survey micro data Documentcensus and survey micro data using $11 microdata managementtoolkit to archive data and metadata - 11. Asian DevelopmentBank(ADB) $1,240 MON 1713: the GovernanceReform HelpedNSO insome ways, including the $500 Program,2001-07 development of abusiness strategy RETA 6088, "Strengthening and This Regional TechnicalAssistance(RETA) $15# Collection of PurchasingPower project supportedassistanceto NSO (and other Parity Data inSelected Developing countries) inpreparingprice measuresunder2004 Countries" 2003-06. round ofthe International ComuarisonProiect TA 4383, "Participatory Poverty Assistance for conductingparticipatory poverty $300 Assessment and Monitoring", 2004- assessment andmonitoring (PPAM) inthe context 07. of the EGSPRS. in20 sample communities in 5 airnagand at 8 sample communities in Ulaanbaatar. RETA 6333, "Statistical Capacity Assists 13 "statistically very weak developing # Building inthe Asia and Pacific member countries", including Mongolia, to Region", 2006- upgrade their statisticalsystems. Will conduct a diagnostic study andpreparea long-term technical assistanceplan. RETA 6356, "Improving Assists developingmember countries "to enhance # Administrative Data Sources for the their capacitiesto compile andmonitor MDG Monitoring of the Millenium indicators inamore timely and regular manner by DevelopmentGoals", 2006- making improvementsinthe use of their administrative data reporting systems", Imdemented in6 countries. including Mongolia. World Bank $1,964 1 TF-028427,2001-04 1 Further support for SCB. Includeddevelopment of a corporate strategy, estimationof a sources & uses table (SUT), and the conduct of the HIES. 2 2004 Survey of the investmentclimate in2004, with $35.41 NSO as subcontractor. NSO subcontracts to MoF for survey work on insuranceproject (livestock) livestock. SCB for poverty monitoring, data transparencyand Subcomponent B3,2006-11 access for researchers to use micro-data outside NSO. 5I Updating of the Statistical Master Support for preparationof aNational Strategy for 28 Plan and Preparation o f a Financing Development o f Statistics. Strategy for 2007-20 10 (TFSCB GrantNo. 057815) underTrust Fund for Statistical Capacity Building, 12007 6 Trust fund TFSCB Grand TF056595: Strengthening Institutional Statistical System 3 I Eurostat -- TACIS 1,029 hoo 1 "Statistics 8" for 2005-06 Assistance for SCB insocial statistics at regional level, improvement o f economic accounts for agriculture, and statistical databasemanagement. 1 In2007, ashort-term consultant began a series of4 Imissions to advice on the national accounts, especially quarterly accounts. 2007 reviewed data from NSO, B o M and MoF, and is preparing a new report under the DQAF. Mongolian Open Society Foundation (Soros Foundation) 1 Survey of the Non-observed 6 Economy in2004 29 Annex 3: ResultsFrameworkandMonitoring MONGOLIA: MONSTAT: Strengtheningthe NationalStatistical System of Mongolia ResultsFramework PDO Project OutcomeIndicators Use of Project Outcome Information The main objective of the project is Access to information/ Years 1-5: NSO management and to improve efficiency and dissemination Project Coordinator will monitor effectivenessofthe national 1. User satisfactionrates have progressin establishingintermediate statistical system of Mongoliato increase in at least 60% by the indicators andtake action ifthese enable it to provide relevant, timely Closing Date are not being satisfactorily andreliable data for evidence-based 2. By the Closing Date, targeted implemented. policy making in support of statistical products are easily Government's MDG-basedNational accessible inrelevant media, Progresstowards project outcomes Development Strategy (NDS). with metadataand interpretation will be reportedtwice a year and of fmdings. comparedwith baselinedata. CoveragelAccuracy I Reliability: There will bejoint mid-term reviews 3. By the Closing Date, with participation of all donors that internationally accepted will be carried out inthe third year statistical techniquesin possibly inNovember. collection, complication and authenticity verification are Mid-term review: No improvement applied by the Recipient, and inthese outcomes may indicatethat regular validations are carried the project components and the out for data sources and implementation strategy needto be statistical products. re-examined. Timeliness: 4. By the Closing Date, statistical outputs are released inatimely manner in accordance with internationally accepted frequency and timeframes Intermediate Outcomes Intermediate OutcomeIndicators Use of Intermediate Outcome Monitoring 1. Adequate policy`andregulatory 1.1 Mechan isms for effective inter- framework as well as effective agency coordination are Years 1-5: Action will be takento institutional framework, establishedand operational. either ensure that these are put into management andhumanresources 1.2 Mechan isms for effective place or to redesignthe project to for statisticsare inplace dialoguewith the data users and correct deficiencies. providers are operational. 1.3 National Stat istics Training Year 5: These results are compared Center established. with baselinedata to evaluate the 1.4 NSO central a ndlocal level projectoutcome. structure optimized and staff trained including staff from relevantministries and agencies. 2. Statistical infrastructure 2.1 R egisters are compiled and ieveloped and made operational being maintained. Years 1-5: Action will be taken to 2.2 Intematio nally accepted :ither ensurethat these are put into 30 classifications, standards and place or to redesign the project to methodologies are adapted and correct deficiencies. used indata production. 2.3 Standard question naire for Year 5: These results are compared survey conducting developed with baseline data to evaluate the and applied. project outcome. 2.4 Targeted surve ys conducted, thematic statistical data are developed and results disseminated I ,3. Investment in physical 3.1 Capacit y for physical operations Years 1-5: Action will be taken to infrastructure and equipment to is adequate and well maintained. either ensure that these are put into facilitate the production and 3.2 At least 75% o f staff at each place or to redesign the project to dissemination o f data by statistical unit at NSO headquartershave correct deficiencies. agencies is undertaken and workstations with direct access adequately maintained. to databases for analysis and Year 5: These results are compared tabulation, and 60% of field with baseline data to evaluate the staff have workstations project outcome. 31 c, I M M I 9 rc m 6 2 2 ;g.- 0 C Y 2 % m c Annex 4: Detailed Project Description MONGOLIA: MONSTAT: Strengthening the NationalStatistical System of Mongolia The Project will be carried out under Phase I-b o f the Statistical Capacity Building Program (STATCAP) APL. STATCAP i s designed as a horizontal APL to make investments in statistical capacity easier and more effective. It was approved by the Bank's Board in March 2004. A STATCAP project i s appraised and prepared for approval at the regional Vice President level following normal provisions for investment lending. The cornerstone o f a STATCAP project i s the development of a comprehensive and integrated national action plan for statistical capacity building, often linkedto a National Strategy for the Development o f Statistics (NSDS), which i s prepared through consultation with both data providers and data users. STATCAP i s designedto support a medium to long-term approach. To enter the STATCAP lending program borrowers need to fulfill certain eligibility criteria. Mongolia has met all requirements o f STATCAP and the project components are designed to support the implementation o f the NSDS, and will be implemented ina coherent, consistent and well-sequenced manner. The major components o f the project are planned as (a) Improving policy, regulatory and institutional framework and the organizational structure o f the statistical system, (b) Strengthening the statistical infrastructure (c) Upgrading statistical operations (improving individual subject matter programs and methodologies as well as the existing data outputs), (d) IT Infrastructure and Equipment, (e) Project Management. A. Improving policy, regulatory, and institutional framework and the organizational structure of the statistical system The statistical system o f Mongolia is centralized. The NSO is charged with managing official statistics and coordinating activities inthis field. The B o M functions independently inthe area o f monetary and banking statistics, and the MoF compiles budget statistics as part o f its operations. Line ministries and other agencies produce two types o f statistical information. One is collected for the NSO on the basis o f methodologies and questionnaires that must be approved by NSO, and that appear in the annual Statistical Action Plan. The other kind is collected for the line ministries' own needs, using methodologies and questionnaires that must be reviewed and discussed with NSO. These statistics do not appear in the Statistical Action Plan. The agencies often publishdata summaries themselves. Measures to strengthen human resources and review and improvement o f organizational structure o f the national statistical system are also considered under this component. The aim i s to improve all aspects o f human resource management. More specifically, performance management, career development and staff assignment programs will be developed and implemented. More proactive and coordinated recruitment procedures will be put inplace. The target i s to improve the qualifications o f the personnel in all statistical offices o f the national statistical system. Training will be provided in basic and advanced methodologies and techniques, particularly those that support the priority indicators for NSDS.Training should be in the form o f seminars abroad and inthe country, consultancies, and on the job training. There will also be substantial opportunity for staff to go on study tours and to participate in international seminars. Meanwhile, this component will also support the design o f a training strategy and the establishment o f national training center for the entire statistical system; so training activities withinthe systemcan be strengthened and coordinated. 37 Al. Review and improvementof existing institutional framework Inrecent years, the NSO andother relevant government agencies have improved information and data sharing. The Law on Statistics was amended in January 2008 that clarified the roles and responsibilities o fNSO and other government agencies dealing with statistics. There is, however, still a need for strengthening institutional framework through increased guidance for statistical operations and inter-agency cooperation. This will help creating a well functioning statistical system at sectoral and regional levels and will make statistical outputs more relevant to users' needs and for the monitoring o f development goals. This component will support the improvement of the Recipient's capacity to carry out the formulation, coordination and implementation o f appropriate statistical policies and programs that will address to the needs o f Mongolia. It will support the review o f existing statistical legislation and development of relevant terms o f interaction that will clearly define the interaction and dialog between NSO and relevant line ministries and statistical agencies. To monitor this process an inter-agency working group could be established or the National Statistical Council could be involved. An internal Review and Monitoring Committee (led by the Deputy Chairman, 3 Department heads and the PCT staff) will also be established to monitor project outputs and outcomes. The review committee will meet at least once a month during the implementation and report to NSO management. It is necessary to pay proper attentionto and timely follow-up ofthe project induced reforms and changes. This component will also address the change management issue by providing necessary training and tools for the Change Manager (preferably at the level o f department head) in order to (i)synthesize and integrate the substantial knowledge that would be transferred for the duration o f the project, (ii) the review and monitoring process o f the project by reporting to lead the NSO management on the project status and generic issues to be addressed, (iii) the work lead o f the internal Review and Monitoring Committee, and (iv) lead the donor coordination process instatistics. Expected outputs will be improved institutional framework and well developed terms o f interaction that promote the efficient production and use o f data and effective interaction among all relevant agencies o f the national statistical system. A2. Improvingthe relationshipbetweendata users and producers The project views data users as an integral part of the statistical system, which is crucial to improvement o f collection, processing and dissemination o f quality data. Hence, it i s important to take account o f users' perspectives inthe production o f statistical outputs. There i s no tradition indeterminingo fuser requirementsfor statistics, especially the requirementsofnon-government users. Currently, most o f the statistical outputs are used only by government agencies as non- government users do not know what i s available and their demands are thus weak. With the development o f civil society, the non-government demand for statistics will become stronger. The NSO will conduct a thorough analysis o f requirements. It will begin with segmentation and analysis o f users according to their functions and data requirements, for example segmentation into government, industry, academia, media, international organizations, and the community at large. It will establish the demand for statistics working with users. It will inform users and potential users about the statistical programs and the data available. User surveys o f needs and levels o f satisfaction will be conducted. Media conferences will be held more frequently. The National Statistical Council will become more active. 38 This sub-component will include the following activities. Conduct a general user requirements analysis and use the results for the improvement of the relevant subject matter areas intheir program improvements (component C). Design and conduct a user satisfaction survey regularly every three years or so, to get an impressiono f changes inuser opinions. Organize regular consultation workshops and seminars upon releasing statistical publications to explain the results and the use o fprincipal indicators. Train staff inline ministries indata analysis. Further, to improve the understanding o f the role o f official statistics and to ensure support for NSO and its work program, meetings and seminars for government officials will be arranged. A3. Improvingthe data disseminationfunctionandprocedures This sub-component will address the problems in data dissemination. Currently, users are not aware of the wealth o f data available. Disseminationpolicies are not presently well articulated or procedures well organized. There i s no marketing policy and a very limited marketing function. Paying more attention to dissemination o f statistical information i s very important to demonstrate the value of statistics and at the same time to contribute to the development o f social, economical and political life o f the country. NSO will work to give a wider range o f users an easy access to statistics by improving publications and the web site. The main objectives for the next five years are: a Develop a comprehensive and integrated dissemination strategy and publications policy to cover all printedreports and web data that i s inline with the international standards for data dissemination. a Begin issuing new annual and monthly publications to disseminate data that was not previously published. a Provide more extensive technical notes in publications about issues o f concern to users, e.g., about breaks inseries and comparability with other data sets. a Gradually develop a consistent style and layout for the various publications. a Provide basic data inthe form of time series on the website inaddition to the publications already posted there. a Prepare an electronic database of monthly and quarterly data that appear in the Monthly Statistical Bulletinand make it available to some users without cost and to other users for a fee. a Makedatasets ofraw, household data available to researchers,after steps have beentaken to remove any identifying information. Prepare streamlinedprocedures to facilitate this. a Prepare and implement a marketing strategy, so that fees can be collected via the internet for access to electronic publications and datasets. a Post the names, e-mail addresses and phone numbers o f specialists on the website, to encourage users to make direct contact with producers. A4. Strengtheninghumanresourcecapacity The NSO and the national statistical systemneed highcaliber, well-qualified and trained staff to carry out the new and challenging responsibilities. A well defined human resources framework will help upgrading personnel selection and training, introducing staff performance incentives. It 39 also helps improving the remuneration system by linking it to performance and developing job specifications for career development o f managers and regular statistical staff o f the system. Retention o f well motivated and qualified staff in the national statistical system will eventually contribute to the objective o f providing timely, reliable and quality data by increasing productivity through improved human resource management. There will be close coordination withplannedand ongoing activities relatedto public administration reforms inMongolia. Therefore, this sub-component o f the project will aim to develop a human resource management framework with an incentive structure to retain and attract qualified professionals and managers inthe national statistical system. Itwill consist of: 0 Development and implementation o f a human resource management strategy that includes performance management, career development and staff assignment and rotation. 0 Establishment o fjob profiles by function and standard career paths for each profile. . 0 Introducing personnel performance monitoring system. 0 Introducing more proactive and coordinated recruitment procedures. 0 Liaising with universities to influence course content and to contact potential employees. Improvement o f staff skills i s absolutely vital involving rapid changes in both methodology and technology, particularly in the context o f the current project to strengthen the national statistical system of Mongolia. Therefore this sub-component will support necessary activities to design and implement a training strategy for the national statistical system that will include classification o f training by type and an inventory o f generic training needs. The strategy will also introduce an annual training review procedure for each staff member and supervisor, and will set annual targets for each office expressed in terms o f average training days per staff member. Establishment o f the National Statistical Training Center will also be supported under this sub- component. Currently, the NSO does not have a training facility or a unit responsible for training. It i s necessary to establish an administrative unit responsible for training. This unit will also be responsible for ensuring there i s an assessment o f training needs within the NSOand for organizing training activities to meet these needs. The training center will also have a library that contains all relevant documentation inelectronic and hard copy format. The following activities will be carried out: 0 Establish a Training UnitwithinNSO. 0 Based on the assessment o f training needs determine the courses to be given by the Training Centre and the expertise requiredto give those courses. 0 EstablishNational Statistical Training Centre. 0 Develop and give training courses. 0 Develop the program to support self-education. 0 Establish a library (both electronic and hardcopy); 0 Develop an on-line training module for regional office staff. 0 Provide language training for key staff. A5. Reviewand improvementof organizationalstructure of the nationalstatisticalsystem 40 The development o f official statistics in Mongolia requires an in-depth review o f the organizational structure o f the statistical systemingeneral andNSO inparticular. It also requires a fine-tuning o f the organizational structure and building up certain divisions that play a leading role in collecting priority data. There are many indications that the NSO divisions for producing statistics are understaffed. Many specialists mustjuggle two or more assignments and must often work unpaid overtime in order to finish their assignments. Furthermore, specialists can seldom find time to engage in analysis of data quality or data reconciliation issues, even when those issues are very important. NSO needs to increase its staff for producing data. To increase the active personnel o f the divisions producing statistics by at least 20 persons, ifpossible 25, as a basis for expanding and upgrading their activities. Some of this could be accomplished by moving staff gradually from other activities but only if and when the specific functions (research, methodology, monitoring) can also be transferred to the producing departments. Mongolia has 22 aimags including the capital city, 346 soums and 1681 bagskhoroos. Each bag or khoroo keeps a close watch over the population o f its area and therefore records some basic demographic data on individuals, households, births deaths, marriages, migration. Aggregated numbers about these events are periodically sent to higher levels (to soums, aimags and finally the NSO). The soums are responsible for data collection about business statistics, business registration, labor statistics andprices. To adopt a more efficient and effective territorial structure for the development statistical system, it is necessary to review the regional office structure and make adjustments where needed. This could take some time to achieve, but coupled with the introduction o f an integrated processing system and more training o f regional staff it could be accomplished. The volume and quality o f data collected will be maintained throughout the reorganization. The following activities will be carried out: 0 Propose and analyze geographical structures with fewer offices but without change o f regional office functions. 0 Select the most appropriate geographical and functional structure. 0 Implementthis structure. B. Strengtheningthe statisticalinfrastructure In broad terms, the aim is to enhance key elements of the statistical infrastructure - registers, classifications, standards and methods. More specifically, the Business Registerwill be enhanced through better identification of inactive enterprises and improved coverage o f large and complex enterprises. Registers o f Populations and housing will be designed and implemented. Key national classifications will be brought into alignment with the international versions and a data element dictionary and a glossary will be created. Questionnaire design expertise will be expanded and design standards will be formulated and applied. Sampling skills will be enhanced and selected full coverage enterprise surveys will become sample surveys. Seasonal adjustment and time series analysis methods will be introduced. More precisely, the following actions are envisaged to be financed under this component: (i) improvement and updating o f statistical registers; (ii) development and improvement o f further classifications and other standards; (iii)further development and improvement o f sampling methods; (iv) improvement o f skills in seasonal adjustment; (v) improvement o f skills in 41 evaluating and improving data quality; (vi) improving questionnaire design procedures and developing Master Questionnaire. B1.Improvement and updating of statisticalregisters Statistical registries (business, population, housing and agriculture) constitute the basic instrument for the surveys of the economy including enterprises and individual proprietors. According to the Law on Statistics "the authorities who register legal bodies shall report necessary information and changes and revisions in the record of state registration for legal bodies to the National Statistical Office." This gives the NSO the overall responsibility of establishing and maintaining these registers. NSO maintains a business register, which has been developed in stages. In the aftermath o f widespread privatization beginning in 1994, NSO created a register o f enterprises, based on data from the tax office. NSO assigned identification numbers to the enterprises, numbers that are now used by the tax office. In 1998, NSO carried out an establishment census with technical and financial assistance from Eurostat. NSO then used the results to add establishments to the business register. From 1999, NSO began to conduct a quarterly business register survey with enumerator visits covering candidates for addition to the register plus a quarter o f the existing units, rotated in such a way that all existing units are covered once a year. The aimug offices enter the data and send it to NSO, the register i s updated at headquarters; and the updated register i s sent to each aimug every quarter. NSO relies on a variety o f sources to identify legal entities for addition to the register: the Central Tax Administration i s the main source, but the Ministry o f Justice i s also used for non-government organizations, the Ministry o f Education for schools, and the Ministry o f Finance for budgetaryunits o f government. A survey o f large establishments in 2004 served to update the register, as did the 2006 census o f establishments. Nearly all legal entities were already registered, but a few additional establishments were discovered by the census. The register includes only legal units that have formally registered with a government agency. Informal businesses are not included. The register i s hierarchical, showing the subordination o f each establishment to a legal entity. The most recent data show 30,867 active legal units (including enterprises and nonprofit organizations) as well as 33,476 establishments. NSO has experimented with converting to a "kind of activity" unit, consistent with Eurostat practice, but has found this difficult to implement the profiling for this and still maintains the register interms o f enterprises and establishments. This sub-component will includethe following activities: Prepare an annual publication on register data. Publish data on the size distribution o f local statistical units (and employment) by uimug and branch. Publish data as well on business "demography", covering the births and deaths o f enterprises and local units, broken down by branch, size and aimug. Participation inthe International Roundtable on Business Survey Frames. Build an integrated database system linking the register to databases for obligatory enterprise reports, with technical assistanceto help develop specifications for the linkage. Work with the Ministry o f Justice and the tax office to upgrade the data for non- government organizations (NGO's). Develop a procedure for updating the activity status and ISIC code o fthe NGO's. Prepare a methodology to standardize terminology inquestionnaires and reports. 42 Develop and implement more efficient procedures for register updating through better and closer cooperation with the Tax Administration. Improve the register by including turnover as an additional characteristic. Investigate profiling procedures used by advanced NSO for determination o f appropriate reporting procedures for big and complex enterprises. Conduct profiling o f big and complex enterprises usingthese procedures. Inmany countries the Population Registeris the main source of current demographic statistics in place o f current estimates that are based on aggregate census results updated with statistics on births, deaths and migrations. Ultimately the census of population may be replaced by the population register supplemented by a suite o f surveys to fill data gaps. Currently the population register i s being maintained by the State Civil Registration Center (CRC), a state owned company, and NSO has no access to the database. This sub-component will support the access to CRC database and will provide necessary tools for establishing secure links. Another important register i s the Housing (dwelling) Register. The aim i s to create and maintain a statistical Housing Register. Inaddition to being a source o f statistics about dwellings, a fully up to date housing register will provide the information required to construct frames for household surveys. The following activities will be supported. 0 Define the Housing Register creation and maintenance procedures and preparethe system specifications. 0 Negotiate arrangements for securing data from the identifiedadministrative sources. 0 Buildandtest the Housing Registerprocedures and system. 0 Load and commission the Housing Register. 0 Modify the household survey programs to use the Housing Register as a source o f frame data. Currently the NSO does not have an Agriculture Register. Establishing on will help designing sample surveys inagriculture and will significantly reduce the cost o f data collection. The aim i s to create and maintain agriculture register. 0 Define the Agriculture Register creation and maintenance procedures and prepare the systemspecifications. 0 Buildand test the Agriculture Register procedures andsystem. 0 Obtain data from the identifiedadministrative sources. 0 Load and commission the Agriculture Register. 0 Modify the agricultural survey programs to use the Agriculture Register as a source o f frame data. B2. Further development and improvementof classifications and other standards Harmonization o f national classifications with international standards i s a requirement to ensure improved quality of the national statistics system and especially to provide comparability with international statistics. The use o f standard classifications i s vital for interpretation and integration o f data. The improvement o f classifications has two major aspects: support and development. Support for a classification covers training o f users inthe meaning and use o f the classification and building a suite o f resolutions to ambiguitiesinthe classification inresponse to 43 requests from users. Development covers creation and introduction o f new classifications as well as the revision o f existing classifications to ensure that they remain inline with the international classifications. Newly developed or revised classifications have to be accompanied by support for the survey areas inswitching from the previous versions. Given the broad range o f national classifications currently available, the major development effort over the next few years will be in their revision. Inparticular, it will include work on the national versions o f the Classification of Economic Activities (NACE) and the corresponding Classification o f Products by Activity (CPA). Keeping track o f the definitions o f the data elements used in the various data sets collected and disseminated i s important for integration purposes but has been mostly neglected at the NSO. There i s presently no comprehensive glossary o f statistical terminology within the NSO. To ensure clarity a multilingual glossary will be developed as a component o f the metadata repository. The project will include the following activities. Review and revise classifications to be in line with the latest versions o f international standards and support survey areas inimplementingthe revised versions. Develop procedures for identifying, storing and accessing data element definitions. Develop procedures for identifying, storing and accessing statistical terms in a multi- lingual glossary. Train subject matter areas and other users in the use o f the resulting data element dictionary and glossary. Convert to ISIC 4. Improve the five-way sectoral classificationfor SNA. Develop a Classification for the Purposes o fNonprofit Institutions serving Households. Develop a Classification o f the Functions o f Government for use innational accounts. B3. Further developmentand improvementof samplingmethods The advantages o f a sample survey over a full coverage survey are the reduced costs and respondent burdenand the increased potential for intensive follow up o f non-respondents and for editingo f anomalous or missingvalues. NSO staff have already learned some sampling skills from various training programs, but the problems remain. The major problem i s the lack o f experience in designing samples for Mongolia. Thus, primary aim o f this sub-component i s to introduce sampling in place o f full coverage surveys wherever feasible. The following activities will be conducted: Review the opportunities for sampling taking into account planned improvements in the Statistical Register; Train the staff (especially at the regional level) insampling methods; Reviewthe current suite o f economic surveys to determine which can be conducted on a sample basis without serious data loss to users; Review the existing full-count surveys and redevelop each o f these surveys as a sample survey; Improve the sampling in household survey taking into consideration the development o f Housing Register and the specific traditions o fthe population. 44 B4. Improvementof skills inseasonaladjustment In the international practice, statistical results are usually presented to public as a time series because this sort o f presentation is the best for forecasting and other types o f analysis. Time series o f statistical results should be as long as possible. But to produce the long time series, it i s necessary (i)to provide methodological consistency o f results over the time period; (ii)to estimate the discrete indicators rather then cumulative data; (iii)to provide the seasonal adjustment for the sub-annual statistics; (iv) to implement the regular revision o f previous results whedif more accurate results are estimated; (v) to use adequate deflation technique and indexes. Although long monthly time series are available for some variables, NSO has no experience with seasonal adjustment. Seasonal adjustment i s greatly needed for production and prices o f fresh produce, which vary sharply by season. Seasonal adjustment i s especially needed to prepare data for use inquarterlynational accounts. To improve the underlying sub-annual data, NSO needs to convert all sub-annual data preparation to discrete periods (months, quarters) instead of publishingcumulative estimates, as has often beenthe case. This sub-component will include the following activities: Create time series o f discrete indicators and revise past results, ifnecessary; Change questionnaires to collect discrete rather than cumulative data (inline with B6); 0 Implement a seasonal adjustment technique (such as X-12 ARIMA) for the sub-annual discrete estimates inall key sectors and activities (GDP, output by activity, etc); 0 Improve current deflation technique and indexes; Present the new time series to the public and explain their advantages. B5. Improvementof skills in evaluatingandimprovingdata quality Data quality audits are needed as a basis for improving data quality. Some o f the information compiled during a quality audit can also serve to inform users about the strengths and limitations o f particular data sets. NSO has little experience indealing with data quality issues. No attention has yet been paid to the problem o f non-response and how to adjust for it. Validation procedures are minimal and rudimentary. In advanced countries, basic techniques for quality control for professional work (including statistics) often include self-audit and peer review. These approaches are effective because the specialists themselves have the most complete information for evaluating their own work, whereas outsiders have much less information and are largely dependent on information provided by the specialists. Peer review i s successful insofar as it evokes a substantial degree of trust and openness on the part of the specialists being reviewed, who will soon have the opportunity to review the work o f other specialists, their peers. Review by outside experts i s also effective to the extent that the outside expert has long experience and a deep understanding o f the problems faced by the specialists. A working group will be formed, perhaps including a staff member with strong management skills to assist in the "change management" that will be involved in facilitating the introduction o f procedures for self- and peer review. The project will include the following activities 0 Develop a quality model - comprising quality concepts and definitions, including the so- called output quality characteristics, relevance, accuracy, timeliness, accessibility, interpretability, and coherence. 45 Develop a quality policy - providing leadership, a framework for definition of.quality objectives, a commitment to satisfying user needs, continual improvement, and reengineering where major changes to existing processes are required. 0 Develop a quality manual - documenting concepts, policies, procedures and responsibilities. Develop quality tools - quality and performance indicators and measurement systems, quality control systems, self administered quality checklists, and a program o f quality reviews. 0 Train staff inquality awareness, principles andprocedures. 0 Implement the quality policy - including continual quality improvement and a quality evaluationprogram. A basic probleminhibiting improvements indata quality is that the field staff is still very close to the administrative functions o f local government, as a result o f which they find it difficult to separate their own statistical duties from the administrative duties o f general government. To deal with this problem, NSO will needto provide training and guidance to local officials. B6. Improving questionnaire design proceduresand developingMaster Questionnaire Questionnaire designhas a significant impact on response rates, probability o f misreporting, ease o f data capture and incidence o f capture errors. It involves knowing how respondents keep their records (accounting practices), how they interpret questions (cognitive research), and how the data are to be captured. Another important issue in questionnaire design i s the consistency. In many cases, surveys conducted indifferent periods for a specific topic are not consistent and comparable due to use o f different questionnaires. To avoid such problems a questionnaire bank or a Master questionnaire with modules for all relevant sectors will be prepared. This will ensure consistency across surveys that will facilitate comprehension, legibility o f answers, ease o f editing and ease o f data entry. The development o f master questionnaire requires extensive coordination among all relevant statistical agencies o f the national statistical system. A questionnaire design unit will be established to designthe Master Questionnaire with modules for all relevant sectors and to ensure consistency. Centralized design o f the master questionnaire and their monitoring is very important for integration. As a rule, corresponding sections of statistical agency will be responsible for the content o f the master questionnaire and work in cooperation with functional divisions, especially with those working with the methodology, survey structure and data processing. In designing the master questionnaire, it is important to ensure that all necessary requirementsregarding the integration o f indicators, efficiency o f data entry and processing are satisfied. Further, it should be designed in a language easily understandable by respondents, thus minimizing mistakes intheir answers. This sub-component will support the following activities: 0 Create a questionnaire design unit, dedicated to the development o f questionnaire design standards. 0 Develop questionnaire design guidelines for all type o f questionnaires (paper, electronic, face to face interviews and computer assisted telephone interviews). 0 Provide training inthe use o f questionnaire design standards to survey areas; 0 Develop and implement procedures for review for all new or recently redesigned questionnaires for conformance to the standards prior to their use; 46 Develop and oversee a program for review and revision o f all existing questionnaires; Develop the Master Questionnaire and necessary guidelines on the use o f it. C. Upgrading statistical operations (improving individual subject matter programs and methodologiesas well as the existing data outputs) The aim is to enhance all individual surveys and administrative data collections through re- engineering and/or continual improvement, taking advantage o f new infrastructure and further incorporating international standards and best practices. This component will address the adaptation o f internationally accepted standards and methodologies in data collection, compilation, and validation by NSO and other relevant agencies. It will also support a thorough review and inspection o f existing data outputs. It is essential to re-examine the coverage and content o f data outputs and the corresponding data inputs in each subject matter area. Starting with the revised SNA93 data requirements as the core, the content of economic statistics program should be reviewed and rationalized with the aim o f reducing the amount o f detail collected. This will be done by identifying and eliminating any indicators that seem inappropriate for a market economy and no longer needed, or that are not published. This will not only release NSO resources for other activities but also reduce respondent burden. It will also support further development o f sectoral statistics. Activities o f this component will be supported through a combination o f consulting, training and capacity building. C1. Fullimplementation of SNA This sub-component will aim to produce national accounts that are timely, reliable and in line with internationally accepted methodologies. The proposed actions are: Complete the 2010 Supply and Use Tables (SUT), investigate and analyze discrepancies init, and document the research and findings involved inbalancingthe SUT. Improve the techniques involved inpreparing QNA, Improve the estimates, and extend the estimates to the expenditure approach as more source data becomes available. Start benchmarkingthe quarterly national accounts on the basis o f the 2010 SUT. Improve the estimation o f gross fixed capital formation. Prepare measures o f Gross National Income and Gross National Disposable Income. Improve current-price measures o f GDP by expenditure and prepare constant-price measures after identifying data gaps and compiling the requiredsource data. Provide enhanced documentation on national accounts methods and data sources to the general public.. Studythe revised SNA methodology due for release in2009 and consider which parts are suitable for early implementationinMongolia. Study the methods for estimatingthe size o fthe non-observed economy. Prepare improved estimates o f the size o fthe non-observed economy inMongolia. Set a standard release schedule for annual and quarterly GDP, announce it on the Web, and adhere to it. Publish an annual report on national accounts, including long time series for both annual and quarterly accounts, showing more detail than can be shown in the Statistical Yearbook, and providing ample documentation regarding methods and source data. 47 Attend workshops and do study tours to learn about environmental accounting ("Green GDP") as practiced in other countries. Study the possibilities for such accounting in Mongolia, and itemize the kinds o f source data that will be required for such accounts. Improve the coordination with balance o f payments (BOP). Improvement o f the assessment o f gross national income (GNI), including labor migration and remittances; Develop a methodology and establish leading indicators for the country; 0 Provide support and training to B O M inthe area o f BOP, trade in services, international investmentpositions statistics. C2. Pricestatistics(includingPPI, CPI and other relevantindices) The aims o fthis sub-component are: 0 Improve the calculation o f Consumer Price Index (CPI), by enlarging the basket o f goods covered and by upgrading methodology. Introduce a customized program for the calculation o f CPI by location and for the nation. Introduce quality adjustments for goods. Adjust for the understatement inthe weights for tobacco and alcohol. Correct for seasonal fluctuations inprices and volumes o f certain goods. Improve the calculation of the Producer Price Index (PPI) by enlarging the basket o f goods covered and by upgrading methodology and prepare PPI for major sectors. 0 Improve the construction cost index. 0 Improve the methodology for estimating the housing price index. C3.2010 Census preparation This sub-component will focus on the main preparatory tasks identified inthe framework o f the run-upto the 2010 Census andwill address the following tasks: 0 Census Mapping. Preparation o f Census training plan and program. Training o ftrainers Training o fmanagers, supervisors, and enumerators 0 Providing equipment and software and training for the preparationo f census. D.ITInfrastructureandEquipment Good infrastructure and enhanced IT system are essential for efficient and effective delivery o f statistical products and Services in the country. Therefore, the project team has paid special attention to the establishment o f well functioning IT infrastructure for the national statistical system. Although the current situation is more advanced than expected, an upgrading o f the IT equipment and skills is neededto achieve improved efficiency andquality. Currently 31 regional statistical offices are exchanging information with the NSO central office through Internet. At the central office the LAN is running with 70 workstations and all servers including web server, database and network servers connected into one segment. The servers are operating under MS Windows Server 2003 and M S SQL Server 2005. The NSO connected to the local Internet Service Provider through 128 Kbps fiber optic line. The NSO has corporate website http://www.nso.mn. 48 Enhanced IT infrastructure and equipment are needed to implementthe reforms envisaged inthis Project. This component will support NSO's strategic goal o f improving efficiency and effectiveness in data collection, analysis, and dissemination processes through the use o f information technology. To achieve this goal a detailed IT plan will be prepared, which includes such key elements as functional requirements, technology architecture, and system maintenance and support plan. It will also encompass a diagnostic review o f IT solutions and IT competences in all data producing agencies including the NSO (central and regional offices), statistical units in line ministries and statistical units in Customs and Tax Offices. Inaddition, the consultancy service will support the preparation o f bid documents that will ensure the effective implementationo f business process changes introduced inthe Project. The proposed IT plan will help creating an IT network for the statistical system that will efficiently and effectively link the central office with the regional offices. It will also provide a unifiedinformatioddata space to carry out all information flows and other services necessary for the entire national statistical system. The implementation of the IT plan will become one o f the major components o f the proposed project. Investmentsinhardware and software will be made as specified inthe IT Plan. D1.Preparationof an IT plan This sub-component will support the development o f a detailed IT plan for the national statistical systemthat will address a thorough upgrading o f the IT solutions and IT competences inall data producing agencies including the NSO (headquarters, and regional offices), statistical units in line ministriesand statistical units in state-owned enterprises. D2.Establishmentof an IT network for the nationalstatisticalsystem This sub-component will support upgrading existing information technology (IT) and other equipment that i s essential to carry out existing and project activities and networking equipment: Information Technology This component will support NSO's strategic goal of improving survey development, data collection, analysis, and dissemination processes through the use o f information technology. In most agencies that collect, process and store data, IT infrastructure (hardware, software, networking and peripheral equipment) are outdated and will need to be replaced. The objective i s to support the national statistical systemin: 0 developing a detailed program for improving the IT infrastructure, 0 ensuring improved efficiency and quality o f statistical processing, accessibility and availability o f databases for handling the preparation o f tables; 0 providing a major upgrading o fthe I T infrastructure combined with increased skills inthe use o f IT tools throughout the organization; puttinginplace adequatemechanisms for dataprotectionand backup o fdata; Organizing training courses bothfor IT specialists and non-IT specialists. Networking equipment A thorough upgrading o f the IT infrastructure and IT competences is needed to improve efficiency and ensure staff learn the new technologies and adapt to the new methods. Several investments in IT, licensed software, and technical assistance will be provided to data producing 49 agencies including the NSO (headquarters, and regional offices), statistical units in line ministries and statistical units in state-owned enterprises. The procurement of equipment will include: highperformance servers to support the data processing processes and provide additional data storage capacity; installation o f a local area network (LAN) at headquarters, workstations, printers and related peripheral equipment, internet switch, UPS and spare parts; installation o f LANs inaimag offices, UPS, and disk backup media; upgraded methods for faster and more reliable data transfer and communication between the central and regional offices, where feasible by email connection, and otherwise by fax, CD and diskette; 0 provision o f new software systems and limitedcustom application software; and 0 Modern printing equipment, including risographs and sheet cutters for central and local statistical offices. E.ProjectManagement NSO will be the main executing agency o f the project and will be responsible for its management. To effectively carry out the implementation and daily project administrative work a financial management specialist and a procurement specialist will be hired by the executing agency. Specifically, this group will ensure compliance with the procurement, disbursement and financial management policies and procedures. 50 Annex 5: ProjectCosts EMONGOLIA: MONSTAT:Strengtheningthe NationalStatisticalSystem of Mongolia Project Cost By Component and/or Activity Com onent Component Name IDA Korean TF TFSCB TOTAL Improving policy, regulatory, and institutional framework and the organizational structure of the statistical system, The review and improvementof existing institutionalframework; $60,000 $60,000 $20,000 $140,000 Improvingthe relationshipbetweendatausers andproducers; $60,000 $30,000 $10,000 $100,000 Improvingthe data disseminationfunction and procedures; $80,000 $20,000 $20,000 $120,000 Strengtheninghumanresourcecapacity; $60,000 $30,000 $20,000 $1 10,000 Review andimprovementof organizational structureofthe nationalstatistical system. $60,000 $20,000 $20,000 $100,000 Sub total $320,000 $160,000 $90,000 $570,O00 B Strengthening the statistical infrastructure, Improvementandupdatingof statistical B1 registers $110.000 $40.000 $20,000 $170,000 Further development andimprovementof B2 classifications andother standards $60,000 $50.000 $10.000 $120,000 Furtherdevelopment andimprovementof B3 samplingmethods $60,000 $40,000 $20,000 $120,000 B4 Improvementof skillsinseasonaladjustment $60,000 $40,000 $20,000 $120,000 Improvementof skills inevaluatingand B5 improving data quality $80,000 $30,000 $20,000 $130,000 Improvingquestionnairedesignprocedures B6 anddevelopingMasterQuestionnaire. $80,000 $40,000 $20,000 $140.000 Sub total $450,000 $240,000 $110,000 Upgrading statistical operations (improving individual subject matter programs and methodologiesas well as the existing data C outputs), c1 Full imdementation of SNA: $100.000 $60,000 $10,000 $170,000 Price statistics (includingPPI, CPIandother I relevantindices) andBOPstatistics: $80.000 $60.000 $10,000 $150,000 2010 Censuspreparation; $150,000 $60,000 $90,000 $300,000 Sub total $330,000 $180,000 $110,000 $620,000 IT Infrastructure and Equipment Preparationof an ITplan $70,000 $20,000 $10,000 $100,000 Procurementofcomputersandother equipment andestablishmentof an ITnetwork $650,000 $100,000 $80,000 $830,000 Sub total $720,000 $120,000 $90,000 $930,000 p Project Management. Consultants(ProcurementandFMspecialists, adhoc advisory services, translation) $60,000 $60,000 Audit Services $20,000 $20,000 E3 Goods (office equipment,software, furniture $5,000 $5.000 51 I Ietc.) I I I I I E4 Office Operating and Maintenance costs $15,000 $15,000 Sub total $100,000 $100,000 Unallocated $80,000 $80,000 Total Project Cost $2,000,000 $700,000 $400,000 $3,100,000 Theproject cost in this table does not include in-kind contributionsfrom TICA (estimated around $700,000). 52 Annex 6: ImplementationArrangements MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia Given the fact that the project is aimed at improving the statistical system o f the country it is necessary to obtain appropriate level o f commitment and support o f various government agencies and ministries. In order to ensure this, the National Statistical Council (NSC) will take the oversight responsibility and monitor the project implementation. The NSC consists o f seven members from Parliament (State Great Hural), government, scientific research institutions and NSO headed by the current Chairman o f NSO. The members o f NSC are appointed by the Parliament. It will meet twice a year and perform the following key functions regarding the project implementation: Ensureefficient interdepartmental (inter-ministerial) interactionand resolve interdepartmental (inter-ministerial) issues; Exercise monitoring and evaluation o fproject progress on a semi-annual basis and propose improvement recommendations where needed. NSO will be the main executing agency o f the project and will be responsible for its overall management and implementation. To effectively carry out the implementation and daily project administrative work, there will be a Project Coordination Team (PCT), headed by a qualified and experienced Project Coordinator, consisting o f NSO staff that will be assisted by a financial management specialist and a procurement specialist (and an assistant) to be hired by the NSO. Specifically, this team will coordinate project activities, manage reporting and auditing activities and ensure compliance with the procurement, disbursement and financial management policies and procedures. PCT will report to the chairman o f NSO or other delegated person and will fulfill the following key functions: Interact with the Bank and other donors; 0 Interact with relevant government bodies at central and local levels on project implementation issues; 0 Interact with relevant NSO departments both at the central and local levels on project implementation issues; 0 Manage a program o f monitoring and evaluation for the project; 0 Prepare draft progress reports for review and finalization by the NSO and further submission to the Project SteeringCommittee; 0 Ensurecommunication andpublication ofthe project results, inparticular at the NSO web-site. All other aspects of the project would be implementedby relevantNSO staff with the assistance o f local and international consultants. Please also refer to Figure 1 below for project implementation arrangements. It is important to note that the project coordination team will not be a PIU as it is the case in many other projects, instead a seamless approach o f not having a PIU will be adopted. The PCT will be using the existing financial management and procurement system o f NSO and will be assisting relevant NSO staff in implementing the project. This i s in line with the directions provided inthe Paris declaration and the Bank's policy on project implementationarrangements. 53 A project operation manual will be preparedto set the framework of rules by which the project coordination team will manage the project, under the World Bank regulations for financial management and procurement. The manual will also include written job descriptions for each member of the team that clearly define responsibilities, lines of supervision, and limits of authority. An appropriate training program which will include World Bank financial and procurement management procedures will be designed for staff and will start prior to project effectiveness to ensure that the project team i s active and ready to operate at project effectiveness. The allocation o f responsibilities should enable the appropriate separation o f duties to ensure proper accountability. The team will produce all necessary reports on financial and procurement activities as requested by the World Bank and described in the manual o f procedures. The project will support salaries o f the procurement and financial management specialists; consulting services for monitoring and evaluation studies, audits, project reviews and the production o f the Procedure and Project Implementation Manuals; and furniture and equipment for the team. Figure 1. Proposed ImplementationSet-Up. Parliament o f Mongolia I I National Statistical Council 54 Annex 7: FinancialManagementand DisbursementArrangements MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia ExecutiveSummary 1. The Financial Management team has conducted an assessment o f the adequacy o f project financial management system for Strengthening National Statistical System o f Mongolia Project (the project). The assessment, based on guidelines issued by Financial Management Sector Board on November 3, 2005, has concluded that the project meets the minimum Bank financial management requirements, as stipulated inBP/OP 10.02, subject to the satisfactory resolution o f the issues listed in paragraph #lo. Inthe FM team's opinion, the project will have financial management arrangement acceptable to the Bank and, as part o f the overall arrangements that the borrower has in place for implementing the operation, provide reasonable assurance that the proceeds o f the IDA credit and grants will be used for the purposes for which they are provided. Financial management risk i s the risk that World Bank credit and grant proceeds will not be used for the purposes intended and i s a combination o f country, sector and project specific risk factors. Taking into account the risk mitigation measures proposed under the project, a "moderate" FMrisk rating was assigned to the project at the pre-appraisal stage. 2. Funding sources for the project include IDA credit, Korean Trust Fund, Trust Fund for Statistical Capacity Building (TFSCB). The IDA Credit and grant proceeds will flow from the Bank into project Designated Accounts (DAs). The DAs will be established at a commercial bank acceptable to the Bank and managed by the NSO (National Statistical Office). CountryIssues 3. Based on the Country Financial Accountability Assessment (CFAA) o f November 2002, Accounting and Auditing ROSC o f 2008, and our current experience and understanding o f the country, we found the overall fiduciary environment is weak and public sector financial accountability system does not function well, and corporate governance remains inadequate in Mongolia. Given the existing weaknesses in the financial accountability framework, a ring- fenced control should be maintained for Bank financed projects until the systemic weaknesses have been adequately addressed. The Bank and Government o f Mongolia (GOM) i s currently working together to integrate the Bank financed projects into the Government Financial Management Information System (GFMIS) which would eliminate the needto ring-fence the FM arrangements for Bank projects. However, this i s still at planning stage and the timing of this roll-out i s still underdetermined. Therefore, this assessment i s still prepared under current conditions and the use o f ring-fenced controls still applies for the project. Once projects are rolled into GFMIS, thus using country systems, this project's FM arrangement will be revised accordingly Summary of ProjectDescription 4. The main objective o f the project i s to improve efficiency and effectiveness o f the national statistical system to enable it to provide relevant, timely and reliable data for evidence- based policy making in support o f Government's MDG-based National Development Strategy (NDS)andthe process o f economic development. 5. The project consists o f the following 5 components: (a) improving policy, regulatory, and institutional framework and the organizational structure o f the statistical system; (b) 55 strengthening the statistical infrastructure; (c) upgrading statistical operations (improving individual subject matter programs and methodologies as well as the existing data out-puts); (d) IT infrastructure and equipment; and (e) project management. The estimated cost o f the project i s USD 3,100,000. For the detailed project description, please refer to the Annex 4 - Detailed Project Description inthe PAD. ExternalAuditing 6. The Bank requires that project financial statements be audited in accordance with standards acceptable to the Bank. In-linewith other Bank financed projects in Mongolia, the GOM will appoint an independent external auditor, acceptable to the Bank, to conduct annual audits of the project accounts in accordance with International Standards on Auditing, under terms o f reference satisfactory to the Bank. The audit will be financed from the IDA proceeds. The auditors will: (a) express an opinion on the annual financial statements; (b) determine whether the Designated Accounts have (i) correctly accounted for, and (ii) used in been been accordance with the financing agreements; and (c) determine the adequacy o f supporting documents and controls surrounding the use o f Statement o f Expenditures (SOEs) as a basis for disbursement. The auditors will also furnish a separate Management Letter, which will: (a) identify any material weakness in accounting and internal control as well as asset management; (b) report on the degree o f compliance o f financial covenants o fthe Financing Agreement, Grant Agreement and Subsidiary Agreement; and (c) communicate matters that have come to the attention o f the auditors which might have a significant impact on the implementation o f the project. 7. The annual audit report o f project financial statements will be due to the Bank within 6 months after the end o f each calendar year. This requirement i s stipulated in the financing agreement. The responsible agency and timing are summarized as follows: Audit Reports Submittedby Due date Auditedconsolidated project National Statistical June 30 o f each calendar year financial statements Office RiskAssessment and Mitigation 8. Inorder to satisfy the Bank's minimumfinancial management requirements, a summary o f risk assessmentand proposed mitigating measures for the project are identified as following: 56 implementing the donor funded projects,will be the main executingagency ofthe project and will be responsible for its overall management and implementation. Inaddition, to effectively carry out the implementation and daily project administrative work, a Project Coordination Team (PCT) of upto 5 persons is to be established. ProjectLevel Substantial Detailed Financial Management Substantial Manual will specify sufficient internal controls to be inplace to monitor the project from financial management perspective. Control Risk Budgeting Moderate Project annualplan, which is Moderate consistentwith the timing of project activities will be prepared, reviewed and monitored by NSO under the oversight of the National Statistical Council. Accounting Substantial ) A Financial Management Moderate The FMM is a Manual (FMM) will be condition of developedfor Bank review, effectiveness. which includesthe project accountingprocedures. A capable fmancial officer 8 ) will be recruitedwith proper qualification and experience. Recruitment and ) Relevantfinancial training of managementtraining will be financial officer provided to the newly i s a condition of recruited fmancial officer. effectiveness. ) Appropriate accounting software will be installed and utilized for the project. InternalControl Substantial The internal control will be Moderate specifically designed for the project and documentedinthe project FMM ,which will at least includebut not be limited to the following: a) Regularbank reconciliation and periodic cashcount; b) Properauthorization and approvalproceduresfor paymentrequest; c) Appropriate segregationof duties; 57 A) Bank's no objection for significant project activities; and :) Annual auditsby external independentaudit firm FundsFlow Moderate ) The flow of funds is Moderate straightforward to support the project smooth implementation; and ) The review and approval procedureswill be documentedinthe F M Mto make the reviewing and funds delivery- processmore _ efficiently Financial Substantial The Chief Accountant ofNSO Moderate will take overall responsibility over project's financial management arrangements. However, NSOwill hire a financial officer who will be responsiblefor the project relatedtechnical financial issues. 3) The project financial reports with proper format and content will be adoptedby the project; and b) Quarterly InterimFinancial Reports (IFRs) will be preparedand submittedto the Bank for review on regular basis as specified inthe legal agreements An external independent Moderate auditing firm will be appointed, acceptedto the Bank with proper terms of reference. Overall ISubstantial Moderate Therefore, the overall FMrisk-rating assignedto this project i s Moderate, provided the proposed mitigating measures are carried out. The F M team will closely monitor the effectiveness of the measures and project FMrisk during project implementation. Strengths 9. NSO has extensive previous experience in implementing several Bank financed projects such as Strengthening the Institutional Statistical System Project (TF28427), Technical Assistance project (MOG-232 I),Living Standards Assessment (P067767), Strengthening Institutional Capacity of the NSO (TF-27587), Strengthening National Statistical System in Mongolia (TF-57815) and Rural Investment Climate Survey. Weaknessesand Action Plan 58 10. NSO does not have experience in implementing the comprehensive World Bank project, as the proposed new project, with significant and multiple financial resources involved. The table below identifies the key weaknesses and the corresponding action plans proposed: Significant Weaknesses Resolution ResponsibleAgency CompletionDate Inadequate financial A financial management management procedures manual (FMM) describing NSO/PCT Before for the project the detailed financial management management procedures approval will be prepared. Lack o f proper financial Interim Financial Reports reporting procedures (IFRs) format and content NSO/PCT Before submitted to the Bank for management review approval Inadequate financial staff (1) Recruiting qualified NSO Before financial officer; and management approval (2) providing FMand 1 NSO and World Bank Before project disbursement training to the effectiveness staff ImplementingEntity 11. National Statistical Council (NSC) will take the oversight responsibility and monitor the project implementation. Under the oversight o f NSC, NSO will be the project implementing agency. 12. The NSC will meet twice a year and perform the following key functions regarding the project implementation: Ensure efficient interdepartmental (inter-ministerial) interaction andresolve interdepartmental (inter-ministerial) issues; Exercise monitoring and evaluation o f project progress on a semi-annual basis and propose improvement recommendations where needed. 13. NSO will be responsible for (i) developing and updating the Annual Plan, (ii) ensuring that project activities are implemented according to the legal documents, procurement plan and Project Operations Manual, (iii) reporting on project progress to the Government and the World Bank, (iv) ensuring that procurement o f goods and services i s done in a timely manner and in accordance with World Bank guidelines, (v) managing project funds and maintaining accounts, including the Designated accounts, (vi) getting the accounts audited, (vii) ensuring adequate budget provisions for the project, (viii) facilitating the work o f consultants and reviewing their outputs. 14. Within NSO, a Project Coordination Team (PCT) will be established to day-to-day project implementation and management work. The PCT will report to the Chairman o f NSO or other delegated person. The PCT i s at least composed of: 59 (a) a project coordinator appointed by NSO, will be responsible for the overall management o f project activities and compliance with its objectives, and for ensuring proper coordination among the various government agencies; ==(b) a financial officer who will be recruited in full time and responsible for budget preparation and follow-up, project financial management including the management o f the Designated Account, disbursement, project accounting and financial reporting; (c) a procurement officer who will be recruited in full time and responsible for carrying out procurement activities consistent with procedures approved by IDA, for managing ongoing contracts, and reporting on the progress o f procurement activities and deliverables under contract. 15. The detailed project organizationchart is illustratedbelow: National Statistical Council PCT Project Coordinator I t Financial Officer I Procurement Officer I Assistant I NSO Officers I 16. The PCT will be responsible for overall coordination o f the fiduciary aspects o f the project including financial management, accounting, and auditing. In particular, it will be at least responsible for, but not limitedto the following: Designing and establishing sound accounting system including assigning chart of accounts; Maintaining up-to-date accounting records and ledgers as well as asset management; Preparing project financing plan on a monthly, quarterly and annual basis; Conducting variance analysis on project financial position andtake further actions; Recording transactions for all project activities; Managing and maintaining Designated Account and its reimbursement; Preparing monthly bank reconciliation statements ina timely manner; Preparing SOEs, withdrawal applications and supplier records; Ensuringthat proper internal control system is in place to achieve accountability at all level; 60 Preparing quarterly Project Financial Monitoring Reports as a part o f Project Progress Reporting and submittingthem to the Bank; Preparingannual financial statements inaccordance with consistently applied accounting standards acceptable to the Bank; Submittingaudit reports; and Properly filing and maintaining all accounting forms and supporting documents Budgeting 17. NSO will prepare an annual plan and budget which will identify the detailed project activities to be undertaken and the role o f different parties in implementation. The annual plan and budget will be submitted to the National Statistical Council for approval, and thereafter to the Bank for no objection. 18. PCT i s required to conduct regular variance analysis during project implementation to investigate reasons for differences between planned (budget) and actual expenditure and take necessary actions to make sure the project can be implementedas planned. Fundsflow and DisbursementArrangements 19. The PCT will maintain and manage two USD designated account (DA) at a commercial bank, on terms and conditions satisfactory to the Bank, including appropriate protection against set off, seizure and attachments. One DA i s for IDA credit, one DA i s for Korean grant and TFSCB. The IDA credit and other grant proceeds will flow from the Bank to the DA, and will be disbursed against all eligible project expenditures The ceiling o f the designated account will be discussed and agreed between the Bank and the borrower during the project negotiation and specified in the Bank's Disbursement Letter. As noted in paragraph 3 above, Bank financed projects will possibly move into the Treasury Single Account system within the Government Financial Management Information System (GFMIS). Once this happens, the DA arrangement for this project will be revisedaccordingly. 20. Further advance will be made from the DA to an operating account to be opened at a commercial bank acceptable to the Bank and managed by the PCT. The operational account will be used to finance small expenditures related to incremental operating costs. It will be maintained in Mongolian Tugrik, and the maximum ceiling o f the operational account will be limited to equivalent to US$20,000. Uses ofthe advances should be reportedand reconciled with the designated account on a monthly basis. The OA outstanding balance will be reported as a separate item in the DA reconciliation statement that is submitted together with the withdrawal applications to the Bank. To transfer the funds from the DA to the OA, the PCT will send the quarterly budget (with monthly allocation) for incremental operating costs to the MOF for its review and approval. Lump sum disbursement for the incremental operating costs will be disbursed from the DA to O A on monthly basis based on the approved budget. Both the Project Coordinator o f PCT and Chief Accountant o f NSO should approve all payments from O A to contractors, suppliers and beneficiaries. 21. The PCT will prepare the withdrawal applications which will be signedand approved by authorized representatives from M O F and NSO. The Chief Accountant o f NSO will ensure the completeness and accuracy o f all withdrawal applications and will append her/his signature as part o f the internal control procedures. 61 22. The flow o f funds and withdrawal applications is as follows: World Bank I Operating ! Account I I I 1 1 - I Contractors or Suppliers Flow of funds ------- Flow ofwithdrawal applications 23. Four Disbursement methods: reimbursement, advance, direct payment and special commitments will all be available to the project. The SOE limits will be set up in line with procurement post review threshold, as follows: (i) contracts for goods estimated to cost the all equivalent o f USD 100,000 or less; (ii)consultant contracts estimated to cost USD 100,000 (firm)/ USD 50,000 (individual) or less 24. The proceeds of the credit and grant would be disbursed against eligible expenditures as specified in the legal agreements as shown in the table below. The category (1) that i s co- financed by all three sources and disbursement will be made sequentially from TFSCB, Korean Grant and IDA Credit. The category (2) will solely financed by IDA Credit. 62 25. The PCT will retain disbursement supporting documents till one year after the receipt of the last project audit report. These documents will be made available for review by the auditors and the Bank supervision missions. Ifthe auditors or the Bank find any disbursements are not justified by supporting documentation or are made for ineligible expenditures, the Bank may withhold further deposits to the Designated Account or suspend project disbursement until the Borrower has: (a) provided the accepted supporting documents; (b) refunded the amount involved to the Bank; or (b) submitted evidence o f other eligible expenditures that offset the ineligible expenditures. Staffing and Training 26. Adequate project accounting staff with educational background and work experience commensurate with the work they are expected to perform i s one o f the factors critical to the successful implementation o f project financial management. The NSO proposes to hire a capable financial officer with advanced education degree in finance and working experience, who will be responsible for maintaining the financial management system o f the proposed project. The recruitment should be completed prior to submission o f the Project for management approval. 27. The financial officer to be recruited will be responsible for related day-to-day technical financial issues. To ensure the financial officer to be recruited will have good understanding o f the Bank's policy and requirementsas well as project specific financial management procedures and guidance, the Bank will provide FM training to the newly recruited financial officer before the project effectiveness. Accounting Policies and Procedures 28. . The administration, accounting and reporting o f the project will be set up in accordance with Bank requirements. The Bank requires borrowers to prepare financial statements in accordance with acceptable accounting standards. The Bank does not mandate a format o f annual financial statements. However, where a borrower prepares financial statements on a modified cash basis, the Bank encourages the adoption o f formats laid out in the International Public Sector Accounting Standards (IPSAS), Financial Reporting under the Modified Cash Basis o f Accounting inorder to monitor and fully reflect the non-cash transactions and payables. The PCT will adopt the cash basis o f accounting for its preparation of the financial statements. Consistent with IPSAS requirements,the financial statements will include the following: 0 Consolidated balance sheet o f the project 0 Statement o f sources and uses o f fund by project components 0 Statement o f implementation o f financing agreement, TFSCB grant agreement and Korean grant agreement 0 Statement o f designated account for IDA credit 0 Statement o f designated account for Korean grant and TFSCB 0 Notes to the financial statements' The accounting and reporting o f the project will be set up inaccordance with Bank requirements and financial statements are prepared in accordance with acceptable accounting standards. The Bank does not mandate a format o f annual financial statements; however, cash basis o f 63 accounting will be used. Accounts and records for the project will be maintained by PCT which will operate and maintain a financial management system (FMS) capable of generating Interim Financial Reports (IFRs) inaccordance with formats to be agreed with the World Bank. 29. As PCT will centrally manage and handle the project financial management, they will be responsible for recording the project accounts, preparing project financial statements and retaining all documentation supporting disbursements as well as processing the withdrawal applications during the life o f the project. 30. To strengthen financial management capacity and maintain consistent quality o f accounting work, the task team has requested the project financial management manual (FMM) used by the proposed project. The FMM will provide detailed guidelines on financial management, internal controls, accounting procedures, funds flow arrangement, withdrawal application procedures, asset management, reporting and auditing arrangement. The FM team will review and provide feedback to the PCT once the draft is received and the FMM will be finalized prior to submission o f the Project for management approval. This FMM should be periodically updated based on significant changes in project implementation and financial management practices Internal Control and InternalAuditing 3 1. The project coordinator should regularly monitor the financial reporting process to ensure the financial officer could fulfill hisher responsibilities in accordance with adopted procedures and guidances. 32. In order to mitigate the risks in the area o f internal control, regular oversight by the National Statistical Council, the Bank's periodic supervision and yearly external audits will serve as the mechanism to ensure that financial management controls are functioning appropriately. In addition, proper authorization for payment request, segregation of duties and other internal control mechanisms will be defined and documented inthe FMM. The procedures inthe FMM mustbe fully and adequately complied with. Financia1ReportingArrangements 33. The PCT will prepare Interim Financial Reports (IFRs) for the project inaccordance with agreed formats as part o f project progress report. The IFRs will be used for project monitoring and supervision. 34. The IFRs will include, but not be limited to: (a) Consolidated Balance Sheet of the Project; (b) Sources and Uses o f Funds by Project Components and Expenditure Categories; (c) Statement o f Designated Account for IDA credit; and (d) Statement o f Designated Account for TFSCB grant and Korean Trust Fund Grant The PCT will submit quarterly IFRs to the Bank starting with the first quarter ended in which disbursements will commence and quarterly thereafter, no later than 45 days after the end o f each relevant quarter. I nformation System 35. The existing computerized accounting software used by NSO i s not designed or developed based on the project specified features, therefore, the Bank recommended that a new accounting software be obtained that would be compatible with the structure and needs o f the 64 project. The FM team will closely work with the PCT in procuring sufficient new accounting software. Financia1Covenants 36. No specific financial covenants are applicable to the project except for those standard financial covenants like project audit and interim financial reports. Supervision Plan 37. The supervision strategy for this project is based on its FM risk rating, which will be evaluated on regular basis by the FMteam and inconsultation with relevant task team leader. 65 Annex 8: ProcurementArrangements MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia A. General Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004 (Revised October 2006); and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 (Revised October 2006), and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank inthe Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. Procurementof Works:No civil works would be requiredand financed underthe Project. Procurementof Goods: A total o f US$ 0.84 million worth o f goods would be procured under this project, such as IT equipment and computers, office equipment and etc. The procurement will be done using Bank's Standard BiddingDocumentsfor all ICB procurement. (iv) International CompetitiveBidding (ICB). Any contract for goods estimated to cost more than US$lOO,OOO equivalent would be procuredunder ICB procedures specified inthe Procurement Guidelines. (v) Shopping.Any contract for goods estimated to cost the equivalent o f US$lOO,OOO or less per contract would be procured under shopping procedures as specified in Para. 3.5 o f the Procurement Guidelines. (vi) Direct Contracting. Equipment including standard software with proprietary nature and obtained only from one sources or which meet other circumstances as specified inPara. 3.6 o f the Procurement Guidelines would be procured on the basis o f direct contracting. Selectionof Consultants:A total o f about US$ 2.23 million worth of consultant services would be required under this project. The consulting services would include Twinning Partnership TA, PCT staff multiple contracts and other ad hoc advisory services. Most services would be provided by consulting firms and some would be provided by individual consultants. (iii) Selectionof ConsultingFirms:The consulting contracts expected to cost more than US$l00,000 equivalent per contract will use the Quality and Cost Based Selection (QCBS) or Quality Based Selection (QBS) processes inaccordance with the relevant provisions o fthe Consultant Guidelines. For the selection o f auditors, Least Cost Selection (LCS) would be used. Consultants may also be selected based on Consultants Qualification Selection (CQS) method and Single-Source Selection (SSS) basis. (iv) Selectionof IndividualConsultants:Individual consultants would be selected and awarded inaccordance with the provisions o f Section V o fthe Consultants 66 Guidelines.Individual consultants may also be selected on a sole-source basis, subject to the Bank's prior approval. . OperatingCosts: A total of about US$ 30,000 would be requiredfor the project operational cost. These costs are largely relatedto office supply, translation and training materials printing, logistic cost for workshops and etc. B. Assessment of the agency's capacityto implementprocurement NSO will be the main executing agency o f the project and will be responsible for its overall management and implementation. To effectively carry out the implementation and daily project administrative work, there will be a Project Coordination Team (PCT), headed by a qualified and experienced Project Coordinator, consisting o f NSO staff that will be assisted by a financial management specialist and a procurement specialist (and an assistant) to be hired by the NSO. Specifically, this team will coordinate project activities, manage reporting and auditing activities and ensure compliance with the procurement, disbursement and financial management policies andprocedures. Procurement activities would be carried out by NSO through its PCT. An assessmentofthe capacity ofthe implementing agency to implementprocurementactions for the pEoject was carried out by the Bank's Ulaanbaatar Office in February 2009. The assessment reviewedNSO"s organizational structure and functions, past experience, staff skills, quality and adequacy o f supporting and control systems, legal and regulatory framework. The overall project riskfor procurement is MODERATE. C. ProcurementPlan The Borrower has developed the initial 18 months procurement plan for project implementation, which provides the basis for the procurement methods. The procurement plan would be available at the PCT and M O F procurement website and would also be available inthe project's database and on the Bank's external website. The plan would be updated in agreement with the project team annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. D. Frequencyof ProcurementSupervision Inaddition to the Bank's prior review, the capacity assessmentof the Implementing Agency has recommended at least one supervision mission per year to visit the project to carry out ex post review ofprocurement actions. 67 Attachment 1 1. DETAILS OF THE PROCUREMENT ARRANGEMENT INVOLVING INTERNATIONAL COMPETITION. 1. Goods and Works and nonconsultingservices. (a) List o f contract Packages which will be procured following ICB and Direct contracting: - - -1 2 3 4 5 6 7 8 9 Ref. Contract Estimated Procurement P- Domestic Review Expected Comments No. (Description) cost Method Q Preference by Bid- (yedno) Bank Opening (Prior/ Date - - Post) 1 Procurement USD830, ICB NA NA Prior September of computers 000.00 and other equipmentand establishment of IT network (b) ICB Contracts estimated to cost above USD 100,000.00 per contract and all Direct contracting will be subject to prior review by the Bank. 2. ConsultingServices. (a) List o f Consulting Assignments with short-list of international firms. 1 I I Descriptionof Estimated Selection Review Expected Assignment cost Method by Bank Proposals (Prior/ Submission Comments ~ Post) Date 1 ITwinning Partnership I USD ICQx IIPrior IIJune2009 I I(consulting services include 1,990,000.00 I I I I I I (b) Consultancy services estimated to cost above USD 100,000.00 per contract and Single Source selection o f consultants (firms) regardless o f contract value will be subject to prior review by the Bank. (c) Short lists composed entirely of nationalconsultants:Short lists o f consultants for services estimated to cost less than USD 100,000.00 equivalent per contract, may be composed entirely of national consultants inaccordance with the provisions o f paragraph 2.7 o fthe Consultant Guidelines. 'Considering a special nature and approachof Twinning arrangements, it is proposedto use CQ insteadof QCBS. 68 Annex 9: EconomicandFinancialAnalysis MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia Economic The characteristics o f this project do not lend themselves to the standard calculation o f economic rate o f return. As the main objective o f this project i s to enable national statistical agencies to provide reliable, timely and accurate statistics required for policy making, the benefits from the project can not easily be measured in monetary terms. However, investment in physical infrastructure and human resources associated with this project i s expected to generate tangible economic benefits. First, improvements in the efficiency o f statistical operations and agencies will result in efficiency gains through wider coverage o f higher quality statistical outputs for given levels o f resources. Second, improved data availability will enhance the potential for evidence-based decision making, at policy, program and project levels. Third, the project will help address the significant costs o f missing or inaccurate data. In addition, the public goods nature o f national statistics provides a strong rationale for public involvement in the statistical sector and the financing o f statistical operations. Financial The project is not amenable to standard financial analysis as national statistical offices have very limited opportunities for significant cost recovery. Therefore, only marginal financial returns are expected from this project. However, there can be several fiscal impacts through the Government's increased ability to generate fiscal savings. First, improvement in fiscal and financial statistics should result in a more efficient budgeting process and public expenditure management. Second, streamlining o f statistical operations would produce less labor-intensive statistical operations and potential savings inrecurrent costs. Finally, although marginally, there would be an increase in Government revenue generated from data dissemination and through reduction incosts. 69 Annex 10: SafeguardPolicyIssues MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia No safeguard policies are triggered by this project. The safeguard screening category i s S2 (no safeguard issues). The environmental screening category i s C (no adverse environmental impact 70 Annex 11: ProjectPreparationand Supervision MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia Planned Acutal PCNreview 09/24/2008 09/24/2008 Initial PID to PIC 10/23/2008 10/23/2008 Initial ISDS to PIC 10/23/2008 10/23/2008 Appraisal 03/30/2009 Negotiations 0445/2009 04/23-24/2009 Board/RVP approval 05/21/2009 Planneddate of effectiveness 06/30/2009 Planneddate of mid-termreview 06/15/2011 Plannedclosing date 12/31/2014 Key institutionsresponsible for preparationof the project: National Statistical Office of Mongolia Ministry of Finance Bank of Mongolia Parliament Standing Committee of Economic Policy Parliament Standing Committee of Budget Parliament Standing Committee of Security and Foreign Policy Bank staff and consultantswho worked on the projectincluded: D.Nergui UNDP External Reviewer GenevieveF. Boyreau WB-EASPR Peer Reviewer Neil Fantom WB-DECDG Peer Reviewer Mohammed Omar Hadi WB-DECDG Sr. Program Assistant Bank funds expendedto date on project preparation: Bank resources: Trust funds: Total: Estimated Approval and Supervision costs: Remaining costs to approval: Estimated annual supervision cost: 71 Annex 12: Documentsin the ProjectFile MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia 1. Mongolia:National Strategy for the Development of Statistics, December 2007 2. Project Concept Note 3. Project InformationDocument 4. Integrated SafeguardData Sheet 5. Marrakech Action Plan for Statistics, Minutes of the first meetingof the Advisory Board, October 26 and 27,2005, Washington, D.C. Chaired by Jim Adams, Vice President, Operations and Country Services, World Bank 72 Annex 13: Statementof Loansand Credits MONGOLIA: MONSTAT: Strengtheningthe NationalStatisticalSystem of Mongolia Differencebetween expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd P108768 2008 MN-Mining Sector Inst StrengtheningTA 0.00 9.30 0.00 0.00 0.00 8.45 0.00 0.00 PI01446 2008 MN-EnhancedJustice Sec Services 0.00 5.00 0.00 0.00 0.00 4.58 0.00 0.00 PO99321 2007 MN-Renewable Energy for Rural Access 0.00 3.50 0.00 0.00 0.00 3.19 1.08 0.00 PO96439 2007 MN-SustainableLivelihoods ProjectI1 0.00 33.00 0.00 0.00 0.00 28.11 5.25 0.00 PO98426 2006 MN-GovernanceAssistance 0.00 14.00 0.00 0.00 0.00 8.24 -0.92 0.00 PO96328 2006 MN-Rural Educationand Development - 0.00 5.00 0.00 0.00 0.00 1.92 -1.35 0.00 READ PO92965 2006 MN-Info & ComInfraDev 0.00 8.00 0.00 0.00 0.00 6.84 0.96 0.00 PO88992 2005 MN-Private Sector DevelopmentCredit I1 0.00 10.57 0.00 0.00 0.00 4.63 2.93 0.00 PO88816 2005 MN-Index-Based LivestockInsurance 0.00 7.75 0.00 0.00 0.00 5.67 4.45 0.00 PO74591 2004 MN-UB SERVICES IMPROVMT 2 0.00 18.00 0.00 0.00 0.00 9.95 5.79 0.00 PO77778 2003 MNEconomicCapacityTech. Assistance 0.00 7.50 0.00 0.00 0.00 3.08 2.29 1.60 PO71023 2002 MN-Financial Capacity Dev. Project 0.00 5.00 0.00 0.00 0.00 1.59 0.59 0.59 PO40907 2001 MN-Energy Sector 0.00 30.00 0.00 0.00 0.00 9.31 4.00 12.46 Total: 0.00 156.62 0.00 0.00 0.00 95.56 25.07 14.65 MONGOLIA STATEMENT OF IFC's HeldandDisbursedPortfolio InMillions ofUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2004 AgBank 0.00 1.17 0.00 0.00 0.00 1.17 0.00 0.00 2001 SEF XACBank 0.30 0.00 0.00 0.00 0.30 0.00 0.00 0.00 2004 TDB 0.00 0.00 4.89 0.00 0.00 0.00 4.89 0.00 Total portfolio: 0.30 1.17 4.89 0.00 0.30 1.17 4.89 0.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. Total pendingcommitment: 0.00 0.00 0.00 0.00 73 Annex 14: Country at a Glance MONGOLIA: MONSTAT: Strengthening the National Statistical System of Mongolia East Lower- P O V E R T Y and SOCIAL Asia & mlddle. 1 Mongolia Paclflc Income Development diamond. 2007 P0pulation.mid-year(millions) 2.6 1914 3,437 GNIpercapita (Atlas method, US$) Lifeexpectancy 1290 2,BO 1887 GNI (Atlas method, US$ biliionsj 3.4 4,74 6 485 Average annual growth, 2001-07 Population (ss) 13 08 11 Laborforce (%) 2.8 12 15 Gross primary M o r t recent estlmate (latest year available, 2001-07) capita enrollment P0verty (%of population belownationalPOvertyline) 36 Urbanpopulation(%of totalpopulation) 57 43 42 Lifeexpectancyat birth (pars) 67 71 69 Infantmortality (per looOlive births) 34 24 41 Child malnutrition(%ofchildren under5) 5 13 25 1 Access to improvedwatersource Access to an improvedwater source (%of population) 72 87 88 Literacy(%ofpopulationage 159 91 89 - Gross primaryenroilment (%of School-age population) D1 10 111 M0ngolia Male 99 111 112 Lowr-middle-income gmup ~ Female D2 D9 D9 KEY E C O N O M I C R A T I O S and LONG-TERM T R E N D S 1987 1997 ZOOS 2007 Economic ratios. GDP (US$ billions) 3 0 I 1 32 39 Gross capital formation1GDP 508 281 35 1 Exports of goods and services1GDP 308 590 65 3 Trade Gross domestic SavingsIGDP 94 340 40 8 Gross nationalsavings1GDP 8 5 378 43 9 Current account balance1GDP -329 6 5 6 9 Interest paymentslGDP Domestic Capital 11 05 Total debtlGDP 57 5 savings formation 45 3 Total debt servicelexports DO 23 Present value of debt1GDP 318 Present value of debtleqorts 47 7 Indebtedness 1987-97 1997-07 2006 2007 2007-11 (averageannualgrovdh) GDP -14 57 86 9.9 -Mongolia GDP percapita -29 45 7 3 8.7 Lowr-middle-incomegroup ~ Exports of goods andservices STRUCTURE o f the E C O N O M Y 1987 1997 2006 (%of GDP) Growth o f capital and GDP (Oh) Agriculture 6 4 390 219 35 Industry 284 272 42 3 Manufactunng 5 9 39 Services 552 338 35 9 Householdfinal consumption expenditure 643 523 47 8 02 03 04 05 06 07 Generalgov't final consumption evenditure 263 0 7 114 -GCF -GDP imports of goods and services 723 530 597 1987-97 1997-07 2006 2007 (averageannualgmuuth) Agnculture 11 -22 75 Industry -43 59 69 Manufactunng 69 0 4 Services -18 7 6 6 1 Householdfinal consumption expenditure Generalgov't final consumption expenditure Gross capital formation Imports of goods and services Note 2007 data are preliminaryestimates This table was producedfrom the DevelopmentEconomics LDB database 'Thediamonds Showfourkeyindicatorsinthecountry(inboId)comparedwithits income-groupaverage If dataaremissing thediamondwll be incomplete 74 Mongolia PRICES and GOVERNMENT FINANCE 1987 1997 20062 007 Domestic prices Inflation (Oh) I (%change) Consumer prices 20 7 5.9 Implicit GDP deflator 0 8 23 8 23.1 117 Government finance (%of GDP,includes current grants) Current revenue 47 8 25 5 36.6 02 03 04 05 06 Current budget balance -5 8 23 14.9 Overall surolusldeficit -GDPdeflator -CPI -9 1 8.1 TRADE 1987 1997 20062 007 (US$ millions) Export and import levels (US$ mlll.) Total exports (fob) 718 569 1,543 Copper 199 635 2'ooo T Non monetizedgold 177 270 Manufactures 96 212 I1500 Total imports (cif) 1135 538 1,486 1000 Food 77 180 1 500 Fueland energy 91 435 Capitalgoods 7 1 420 0 Export pnceindex(2000=WO) 198 01 02 03 04 05 08 07 Import pnce index(2000=WO) %O CEXPOrtS c Inports Terms of trade (2000=x]OJ 110 BALANCE o f PAYMENTS 1987 1997 20062 007 (US$ millions) Current account balance to GDP (%) Exports of goods and services 908 621 2,030 10- ~ Imports of goods andservices 1889 593 1,880 Resourcebalance -981 28 150 Net income -11 -a -145 Net current transfers 52 189 Current account balance -993 68 221 Financing items (net) 1027 -147 6 9 Changes innet reserves -35 79 -389 Memo: Reserves including gold (US$ millions) 107 822 Conversionrate (DEC,local/US$J 3 0 790 0 1.65.4 I 7 04 EXTERNAL DEBT and RESOURCE FLOWS 1987 1997 20062 007 (US$ millions) ~ C o m p o s l t l o no f 2006 debt (US$ mill.) Total debt outstanding anddisbursed 608 1,444 IBRD 0 0 0 IDA 97 301 331 Total debt service 63 48 IBRD 0 0 0 IDA 1 5 6 Composition of net resourceflows Official grants 59 79 Official creditors 105 52 Private creditors -6 15 Foreigndirect investment (net inflows) 25 344 Portfolio equity(net inflows) 0 0 World Bank program Commitments 29 0 20 A - I B R D E - Bilatetal Disbursements 34 t3 20 'B .IDA D Other nultilatetal - F Private - Principal repayments 0 2 3 C.IMF G. Short-tern Net flows 34 13 6 Interest payments 1 2 2 Net transfers 33 8 14 Note This table was producedfrom the DevelopmentEconomics LDB database 9/24/08 75 Annex 15: Governanceand AccountabilityIssues MONGOLIA: MONSTAT: Strengtheningthe National StatisticalSystemof Mongolia Overview The project aims to improve efficiency and effectiveness o f the National Statistical System to enable it to provide relevant, timely and reliable data for evidence-based policy making in support o f Government's poverty reduction strategies and the process o f economic development. Though NSO will be the implementing agency, the weak country governance and accountability systems still pose substantial fiduciary risks for the project implementation. Objective The objective o f this annex is to present mechanisms that will strengthen the control over the project implementation, mitigate the risk o f corruption, collusion and fraud and will ensure that project objectives are achieved. The annex identifies potential risks arising from the fragile governance and accountability environment and presents mechanisms to be integrated into the Project Operation Manual (POM) to address these risks. Strategy NSO recognizes the inherent risks o f project implementation in such a high-risk environment as Mongolia. The project proposes to limit the potential risks related to governance issue in a systematic manner by actively promoting greater transparency, accountability and integrity through proper project design and implementation. These actions can be summarized as follows: 1. Twinning Arrangement: It is envisaged that a twinning (partnership) relationship will be established between NSO and one o f the well-established statistical offices from developed countries. Under this arrangement, the NSO will prepare detailed TOR acceptable to IDA for each consulting and training activity and sign one contract for all activities that the twining partner will carry out. It i s anticipated that this will cover most o f the consulting and training activities that the project will finance. This approach will significantly reduce the transaction time and cost o f implementation, as well as the risk o f improper management o f project funds. 2. Project Implementation Arrangements: Under the proposed project implementation set- up, the relevant NSO staff will take all responsibility for the project implementation. Local consultants who are experts inprocurement and financial management issues will assist NSO to administer day to day activities o f project implementation. This arrangement, where no stand-alone PIU i s established and the whole responsibility lies with the relevant government agency will foster efficient, effective and accountable procurement execution, contract management and monitoring o f project outcomes. Local consultants will be selected based on merit and provided with the necessary training in the relevant areas o fproject implementation. 3, Results-Oriented Monitoring and Evaluation (M&E) Framework: A results-oriented M&E framework has been developed under the NSDS and was used as the basis for the 76 project's M&Eplan to track progress and demonstrate the impact o f project activities and implementation arrangements. 4. Enhanced disclosure and transparency: A proactive attitude and approach has been adopted relating to transparency and public dissemination o f project-related information, including through assistance o f the Country Office's Public Information Assistance and use o f the Bank's PIC to be soon established inMongolia. All project related information (such as the information on the twinning partner, suppliers and contractors, progress reports, etc.) will be regularly posted at the NSO website to eliminate unqualified firms and/or individuals from participating inthe project activities as consultants or suppliers. 5. Strict Adherence to the Bank's Procurement Guidelines and Procedures: Detailed procurement guidelines will be implemented to promote efficient and timely procurement, and minimize procurement-associated risks. In addition, external presence by civil society and donors at bidopening is strongly encouraged. 6. StrengthenedFinancial Management Guidelines and Procedures: Detailed procedures for strengthened financial controls, including payment validation procedures, have been designed for all project activities to mitigate fiduciary risks. 7. Complaints HandlingMechanisms: Mechanisms for effective and transparent handling o f complaints by the project Steering Committee are included in the Project Operational Manual. 8. Sanctions and Remedies: The project has zero tolerance for corruption, collusion and fraud. Any suspicion o f such practices shall warrant immediate investigation with severe penalties for any party found culpable o f such practices. CriticalSuccess Factors Ownership and Support. The success o fthe project depends on continued support from NSO and selected line-ministries, such as Ministry o f Justice and Ministry o f Finance. In light o f the twinning arrangement twinning partner's role will also be very important for the successful implementation o f the project. Intensive Supervision. Even strengthened project implementationprocedures and guidelines may not be enough to completely eliminate potentially corrupt and fraudulent activities. It i s highly conceivable that some vested interests will seek to adapt and discover new methods to maintain their position. Therefore, giventhe weak capacity environment the task team will pay particular attention to the governance issue in its intensive supervision efforts, which will be reflected in the ImplementationSummary Reports and Aide-Memoires. PART 11: MITIGATION MEASURES TwinningArrangement The Marrakech Action Plan for Statistics (MAPS) Advisory Board' recommended greater use o f statistical offices of developed countries through a twinning mechanism to help reduce the risk o f 9MarrakechAction Plan for Statistics, Minutes of the first meeting ofthe Advisory Board, October 26 and 27,2005, Washington, D.C. Chaired by Jim Adams, Vice President, Operations and Country Services, World Bank. Document is inthe project file. 77 implementation o f capacity building projects that could be constrained by the lack o f expertise and technical assistance. Following this recommendation the project will help NSO to establish a twinning relationship with one ofthe well-established statistical offices from developed countries. Itis possible to have a twinning arrangement with a consortium formed by two or more statistical offices from developed countries. The twining partner will carry out most o f the consulting and training activities based on the detailed TORs prepared by NSO that are acceptable to IDA. Under such an arrangement, the number o f contracts to be signed will be significantly reduced that will, in turn, reduce the risk o f any wrongdoing and improper management o f project funds. Another important aspect o fthis approach i s that the transaction time and cost o f implementationwill also be reduced. ProjectImplementationArrangements Project implementation will be carried out by NSO with assistance in fiduciary and coordination aspects o f the Project Coordination Team comprising o f local consultants. Overall project supervision and evaluation responsibility will lie with the National Statistical Council. Terms o f Reference (TORs) describing the roles and responsibilities for all key project personnel have been prepared by the NSO, agreed with the IDA, and included inthe Project Operational Manual (POM). These TORs and POM will form the basis for annual reviews o f the project governance and accountability arrangements. NSO shall prepare appropriate procedures and guidelines related to all project activities such as procurement, financial management and reporting, record keeping, complaints handling and M&E. These guidelines and procedures shall be included in the POM and be periodically reviewed by NSO. Given the fact that the project i s aimed at improving the statistical system o f the country it i s necessary to obtain appropriate level o f commitment and support o f various government agencies and ministries. In order to ensure this, the National Statistical Council (NSC) will take the oversight responsibility and monitor the project implementation. The NSC will meet twice a year and perform the following key functions regarding the project implementation: Ensureefficient interdepartmental (inter-ministerial) interaction and resolve interdepartmental (inter-ministerial) issues; Exercise monitoring and evaluation o fproject progress on a semi-annual basis and propose improvement recommendations where needed. NSO will be the main executing agency o f the project and will be responsible for its overall management and implementation. Ifneeded, it will be assisted insubstantive issues by local and international consultants to be selected on merit basis and in accordance with the Bank's guidelines. Project Coordination Team (PCT) o f up to 5 persons will be in charge o f efficiently carrying out the implementation and administrative work. A project coordinator who is an expert in project management, a financial management specialist, a procurement specialist and an assistant will be 78 hired by the NSO. Specifically, this unit will coordinate day-to-day project activities, manage reporting and auditing activities and ensure compliance with the procurement, disbursement and financial management policies and procedures. PCT will report to the chairman o fNSO. Inorder to build capacity and reduce governance risks the project will pay particular attentionto fiduciary training for NSO and PCT staff. In particular it i s envisaged that NSO and PCT procurement staff will undergo in-country training prior to project effectiveness and, if necessary, thereafter abroad in World Bank procurement guidelines and Government procurement regulations to ensure compliance with such processes. The financial management staff o f NSO and PCT will also be trained in-country and, ifneeded, abroad on financial management and reporting, including the preparation and utilization o f World Bank Financial Monitoring Reports (FMRs). The FMR will provide an opportunity to strengthen fiduciary oversight by integrating procurement, implementation and financial management; Results-OrientedMonitoringandEvaluation(M&E) FrameworkandActionPlan The National Statistical Council (NSC) will play an important role inmonitoring and evaluation o f the project implementation and its expected outputs and outcomes. NSC shall endorse and monitor the implementation o f the project and results-oriented M&E indicators. NSO with technical assistance o f the Project Coordination Team (PCT) shall develop, monitor and review the results-oriented M&E indicators and when necessary revise and update them. NSO shall also review M&E reports prepared by PCT, particularly in relation to tracking progress and demonstrating the impact o f project activities and implementation arrangements. NSO will be responsible for the submission of the M&E reports to the Government and the Project Steering Committee. EnhancedDisclosureandTransparency PCT will make the below activities publicly available within 20 days through the NSO website: 0 All annual procurement plans and schedules, including all updates thereof; All short-lists of consultant firms and contractors/suppliers together with the names and dates o f all expressions o f interests received; 0 Inthe case ofpre-qualification, all lists ofpre-qualified contractors and supplierstogether withthe names and dates ofproposals received; Summaries o f all bidding documents as well as all requests for proposals issued in accordance with the procurement provisions o f this agreement; PCT will also make the activities listed below publicly available within 1 month through the NSO website; 79 All annual audit reports (financial or otherwise, and including qualified audit reports) and audit management letters prepared in accordance with the financing agreements for this project, and all formal responses and follow-up actions o f the government; the disclosure o f audit reports will be completed not later than 30 days after receipt o f these reports by project management; All World Bank mid-term review reports prepared for this purpose, in accordance with the legal agreement; StrictAdherenceto ProcurementGuidelinesand Procedures PCT shall: 0 Place Specific Procurement Notices (SPN) in local media as outlined in the POM and, where necessary, on the UNDB and DgMarket websites; 0 Specify within any SPN/Invitations to Bid, the requirement for all proposals to include clear and detailed specifications and cost breakdowns for all proposals 0 N O T impose any restrictions (geographic or otherwise) to limit the participation o f consultants/bidders; 0 Ifneeded,inviterepresentatives ofend-users, NGOsandCSOs to attendbidopenings; 0 Prepare and maintain reports o f bid openings for all contracts subject to prior-review by the World Bank; 0 Seek at least three quotations incases of shopping; 0 File and maintainprocurement documents inaccordance with POM guidelines. 0 Ensurethat all SPN and informationon bidopening are placedonNSO website; 0 Maintain, and annually publish on NSO website, a project price data-base o f commonly procured items (including office supplies) from previous competitively tendered contracts; 0 Ensure Due Diligence and Disclosure by Bidders. 0 Explicitly state in all SPNs for all procurements valued at or more than USD100,OOO the requirement for all firms to submit as part of their proposal their full particulars including: o The postal and email address, telephone and fax numbers, URL of the registered office, and address o f the principal place o f business if different from the registered office; o The names, addresses and telephone and fax numbers of all partners and shareholders who hold a 10percent or greater share inthe firm; o The names, addresses and telephone and fax numbers of all principal officers of the firm; o A banker's opinion statement ofthe firm; 0 Have the right to reject a firm's proposal ifany o f the above information i s not disclosed; 0 Requireall individual consultants to disclose a signedstatement of any relationshipup to the third degree with any grade/level Head o f Department official from the agencies involved inproject implementation, as the case may be; 0 Be responsible for conducting adequate checks and due diligence on any information and/or signed statements provided by firms and individual consultants. 80 StrengthenedFinancialManagementandPaymentValidation PCT shall require: Verification o f satisfactory completion o f any workshops and training activities prior to reimbursementof any expenses incurredby the participants or the Project; Signature o f at least 2 authorized individuals outlined inthe POM for any withdrawals o f funds from the project designated account; Minimal document requirements for payment authorization, to be retained at the NSO and attached to the relevant payment voucher for audit purposes, even if not required to be submittedto the treasury payment/field office; Formal invoices on company letterheads, with complete contract addresses and tax registration number; For individual consultants, copies o f ID cards to be appended to invoices; For claims for reimbursable expenses as specified in the contract, original third party invoices and receipts (including travel tickets, hotel bills, contracts for rental of office equipment, receipts for operating expenses); For goods, warrant cards, evidence o f delivery (packing list or transportation documents and acceptance, and certificate o f origin ifimported); For training, workshops and seminars, signed list o f attendees and photographs from events. NSO with assistance o f the PCT shall be responsible for: Preparation and submission o f consolidated monthly, quarterly, semi-annual and annual progress and financial report to the Government, NSC members and all stakeholders. ComplaintsHandlingMechanisms All complaints received will be properly registered, reviewed and submitted to the NSC for consideration. NSC will serve as the complaint handling body for the project. Detailed procedures for complaints handling are set out in the POM and will be reviewed on a semi- annual basis. The Project Coordination Team shall periodically review the results o f complaints handling mechanism for the project, particularly provisions for follow-up investigations o f serious and unresolved complaints by the internal auditors, and/or third party audit to ensure independency and reliability o fthe system. Sanctions & Remedies Upon decision o f the NSC, the NSO requires the concerned ministry/institution to take action, including prosecution, against staff involved incorruption, collusion, nepotism. NSO will put inplace by project effectiveness a system o f blacklisting for companies and individuals that engage in collusion or have produced outputs o f unacceptably poor quality. 81 0 Upon decision o f the NSC the NSO shall apply a 'one-strike' policy to all contractors and consultants - any case o f complicity in corruption, collusion, nepotism and/or fraud will lead to dismissal, disqualification from all further project activities and possible prosecution. 0 NSC may drop/discontinue an entire sub-component if it fails to properly deal with issues o f corruption, collusion, nepotism, fraud and/or persistent procurement irregularities. 82