Document of 63802 v1 The World Bank Report No: RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF DEVELOPMENT CREDIT AGREEMENT NO. 3908 YF MAY 25, 2004 TO THE REPUBLIC OF SERBIA August 9, 2011 ABBREVIATIONS AND ACRONYMS REC Real Estate Cadastre RECRP Real Estate Cadastre and Registration Project RGZ Republic Geodetic Authority Regional Vice President: Philippe Le Houérou Country Director: Jane Armitage Acting Sector Manager: Aziz Bouzaher Task Team Leader: Gavin P. Adlington 2 SERBIA REAL ESTATE CADASTRE & REGISTRATION PROJECT (SERBIA) P078311 CONTENTS Page A. SUMMARY................................................................................................................ 4 B. PROJECT STATUS.................................................................................................. 4 C. PROPOSED CHANGES .......................................................................................... 5 3 REAL ESTATE CADASTRE & REGISTRATION PROJECT (SERBIA) RESTRUCTURING PAPER SUMMARY The Real Estate Cadastre and Registration Project (RECRP) is approaching the closing date currently scheduled for October 31, 2011. This paper proposes a reallocation Credit proceeds between disbursement categories to account for actual usage and commitments; an extension of the project Closing Date by four months to February 29, 2012; and the granting of a grace period of four months for withdrawal of funds in order to make final payments. The request for these changes have been made by the Government in their letters dated July 7, 2011 and July 21, 2011. These changes will enable completion of all project activities and disbursement of the funds associated with these remaining activities. No changes to the project development objective, environmental assessment (EA) category, outcomes or the results monitoring framework are proposed. PROJECT STATUS The Project is progressing well in achieving the Project development objective: to increase confidence and lower transaction costs by building a more efficient property registration and cadastre system, with the purpose of contributing to the development of effective real property markets. The Project has focused on technical and public awareness solutions to improve the quality of services; targeted training and capacity building to increase the skills and the knowledge base of its staff; developed and implemented a good communication strategy to raise awareness of the registration process; and provided free legal services to ensure that citizens understand the procedures and requirements for registration. Project targets for increasing real estate market activity, including mortgages, have already been exceeded and targets for completing digitizing of records are also exceeded. Targets for completing the real estate cadastre (REC) by systematically registering all legal properties in the country are nearing completion. The REC has been established for 94 percent of all cadastre municipalities (CMs) with the works in the remaining 6 percent ongoing and due to be completed before the end of the proposed extended period of the project. The Republic Geodetic Authority (RGZ) is committed to completing the REC in the whole country by the end of 2011. There are no outstanding covenants awaiting compliance and audits are up to date (2010 audit completed) and rated as satisfactory. Prior audits were also found to be satisfactory to the Bank. Demand for registration services is growing, particularly in Belgrade, and the RGZ has recently implemented reforms to deal with the increased demand. There is progress in reducing the number of days required to register a transaction, and RGZ is quickly approaching the final target of five days. A customer satisfaction survey has been recently completed and the findings indicate that customers are generally satisfied with 4 registration and cadastre services and that the communication strategy has contributed in raising the awareness and mobilizing the public to register. Current disbursement is 86 percent. In February 2011 the contract for development of the Information and Communication Technology (ICT) system was terminated due to non- performance by the contractor. In March 2011 the very experienced procurement officer left the project. It was not possible to find another procurement officer of suitable experience in Serbia and international recruitment had to be carried out. Following cancellation of the ICT system development contract a new ICT strategy was developed by RGZ and the funds originally allocated for the ICT system development contract (US$ 3.6 Million) have been reallocated to fulfill the new strategy. The reallocation requested includes reallocation of some of the funds for technical services to goods and consulting services because of the cancellation of the ICT system development contract. The reallocation also accounts for an increase in funds used for civil works because of higher than expected costs. The request for an extension to the project period and reallocation of funds is a result of the delays experienced following the departure of the procurement officer and the cancellation of the ICT development contract. If the reallocation and extension are granted The project is expected to close satisfactorily. PROPOSED CHANGES • Reallocations As described above, reallocations are required because (a) Civil works costs were slightly higher than originally envisaged; (b) Funds allocated for ICT system development reallocated from technical services category to goods and consulting services following cancellation of the ICT system development contract and development of a new ICT strategy. As per PIU confirmation, category (4a) Consulting Service – Audits and experts, should correctly state SDR553,624 instead of SDR533,624 per Government letter of July 7, 2011. Category of Expenditure Allocation % of Financing Current Revised Current Revised Current Revise (1) Works No change 3,048,000 3,226,747 80% No change (2) Goods No change 3,937,000 4,732,424 95% No foreign change expenditur es; 100% local expenditur es. (3) Technical No change 3,529,000 2,099,024 85% No Services change (4) Consultant (a) No change 5 Services: (a) expert 500,000 553,624 70% for advice, individual No research s change reviews and 80% for auditing companies (b) implement 7,588,000 7,990,181 ation and operationa l tasks (5) Training No change 458,000 458,000 100% No change (6) Operating Costs No change 1,040,000 1,040,000 80% until No December change 31, 2006; 60% thereafter (7) Unallocated No change 0 0 Total Total 20,100,000 20,100,000 • Closing Date The proposed extension of closing date from October 31, 2011 to February 29, 2012 would be the second extension. The first extension was for one year from October 31, 2010 to October 31, 2011 and was granted primarily to compensate for the time lost due to delays in transferring land books from the municipal courts to the RGZ. As indicated, this extension is primarily to account for changes to the information technology strategy and delays that have resulted from the departure of the procurement officer. • Grace Period The government have requested a four month grace period after the closure of the project in order to withdraw funds from the credit after completion of the project. This period will be needed and it is recommended that a Grace Period to June 30, 2012 be approved. 6