PROGRAM INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB6647 Operation Name Third Performance and Accountability of Social Sectors (PASS3) Development Policy Loan (DPL) (DO-3rd Perform.&Accbilty of SocSctrs DPL) Region LATIN AMERICA AND CARIBBEAN Country Dominican Republic Sector Other social services (25%); Health (25%); General education sector (25%); General public administration sector (25%) Operation ID P125806 Lending Instrument Development Policy Loan Borrower(s) GOVERNMENT OF DOMINICAN REPUBLIC Implementing Agency MINISTRY OF FINANCE Date PID Prepared June 15, 2011 Estimated Date of Appraisal September 8, 2011 Estimated Date of Board November 1, 2011 Approval Corporate Review Decision Following the corporate review, the decision was taken to proceed with the preparation of the operation. I. Key development issues and rationale for Bank involvement Despite recent improvements in this decade, the Dominican Republic (DR) still faces challenges in ensuring access to quality education and health for most of its population, especially its poorest citizens. Access to pre-school and secondary school is limited (31 and 53 percent, respectively) and unequal, with important divergence in enrollment based on household income. In health, the confluence of high levels of service coverage and stubbornly high levels of maternal mortality (150 per 100,000 deliveries in 2007) suggests substantial shortcomings in the quality of delivery of health services, particularly at the first level of care. Preventive interventions such as ensuring access to micronutrients for mothers and children remain an important challenge, particularly for the poorest groups. Low human capital accumulation, particularly among the poor, relative to comparable countries is partly a result of the scarce public resources being allocated to the crucial health and education sectors. The programmatic Performance and Accountability of Social Sectors Program (PASS) series was initiated in the context of the wave of 2009 crises (food, fuel and financial). Based on the experience of the 2003 domestic banking crisis, the DR Government feared that the new wave of crises would increase poverty and unemployment and create additional fiscal pressures that would reduce already limited social sector spending, while also potentially undermining planning efforts to improve equitable access to quality education and health services. As a result, the DR Government seized the opportunity to promote long overdue reforms in both social policy and the quality of public expenditure. Reforms supported by the first PASS operation, combined with other instruments, were able to preserve the human capital of the poor in the short-term. PASS1 established the conceptual, institutional, and operational revamp of the safety net framework, particularly the Solidaridad program, to focus on promoting human capital investments by poor households. PASS1 also explored synergies between the safety net revamp and the creation of new budget planning mechanisms to improve the targeting of the fiscal resources dedicated to social transfers and the progressive coverage of supply-gaps in education, health and nutrition. PASS2 advanced deeper into the reforms initiated by the first operation and strengthened the institutionalization of reforms to move beyond the preservation of human capital during the crisis to enhance the human capital assets of poor households. PASS2 developed the necessary governance arrangements and institutional strengthening to effectively administer the redesigned CCT Solidaridad across social sector ministries and agencies and to gradually introduce performance agreements to orient an institutional focus on results. PASS2 also supported the creation of the first Medium-Term Public Expenditure Framework to increase predictability, transparency, and rationalization of the budget, including critical inclusion of projections for social protection budget envelopes, entitlements, protected programs, and financing sources through 2013 and initiated the first social accountability mechanism of the Solidaridad program, Community Scorecards. This third PASS operation (PASS3) reflects the Government’s effort to consolidate and expand beyond reforms of the key social protection and public management reforms initiated under the first and second operations and ensure their sustainability, as summarized below. II. Proposed Objective(s) The PASS series’ four inter-related objectives remain consistent in the proposed third operation, to support policies which are expected to: (i) enhance the performance of social sectors to promote human capital (health, nutrition, education) for the poorest citizens, through a fundamental redesign of the Government’s Conditional Cash Transfers (CCT) program, Solidaridad, and its articulation with critical actions in health and education; (ii) improve budget management to support the joint performance of the CCT program across these social sectors; (iii) support the gradual introduction of Performance Agreements in social sectors; and (iv) enhance transparency and accountability to users by strengthening the enabling environment for a better informed demand for improved public sector performance in the social domain. III. Preliminary Description The proposed Third Performance and Accountability of Social Sectors (PASS) DPL is the third of a programmatic series in the Dominican Republic to improve results in social sectors (mainly social protection, education and health), preserving in the short term, and enhancing in the medium term, the human capital of the poorest citizens. PASS3 will support selected policy actions to: (i) consolidate the conceptual, institutional, and operational revamp of the CCT Solidaridad, including the systematic verification of new CCT co-responsibilities for at least 80 percent of CCT families, the decentralization of CCT operations to the regional level, and the design of an integrated Monitoring and Evaluation System for the CCT shared across sectors and agencies; (ii) strengthen the internal efficiency and accountability of health services through the separation of functions and new daily management information system; (iii) enhance the efficiency and quality of education services, through greater deconcentration of resource allocation and validated student evaluation standards for secondary education; (iv) improve the quality of service related to the CCT payment mechanism through greater competitiveness and access to information and improve the accuracy of the targeting mechanism; (v) expand the coverage of the CCT Solidaridad and the targeted electricity transfer, Bonoluz, to respond to rising food and fuel prices; (vi) enhance budget management to improve the joint performance of the CCT Solidaridad to gradually close supply-gaps through coordinated appropriation, allocation, monitoring, execution and reporting; (vii) introduce a new results-oriented approach to program management through the signing of the first performance agreements for specific social sector programs in health and education; (viii) improve access to and understanding of the budget through the launch of the Consulta Amigable online budget transparency portal to provide free, easy-to-use access to Government budget information; and (ix) enhance citizen participation in and oversight of social programs through the definition of the expansion of the first social accountability mechanism of the CCT Solidaridad and the strengthening of the CCT complaint mechanism. IV. Poverty and Social Impacts and Environment Aspects The findings of the first iterations of a Poverty and Social Impact Analysis (PSIA) point to the potential for positive impacts from the PASS-supported reforms, particularly regarding the full- fledged Conditional Cash Transfer program to promote human capital accumulation among the poor. Positive externalities are also expected beyond the program on improved targeting, results- based financing, greater transparency, and complementary health and education efforts. Conversely, the findings also highlighted the barriers to compliance with health and education co-responsibilities by poor families, including lack of access to national identity documentation and the penalization of households for non-compliance due to remaining supply gaps, which is being mitigated by the second policy area supported by the PASS program. Additional analysis confirms the substantial expected positive human capital impacts of the CCT overhaul, including an estimated increase in school enrollment by 6 percentage points and an expected decrease in child labor by 9.2 percent due to the introduction of education co-responsibilities; new health co- responsibilities are estimated to double the attendance of children under five by a Healthcare Professional, according to the same ex-ante micro-simulation. Consistent with the first and second PASS operations, the actions supported by this proposed third PASS operation are not likely to generate significant positive or negative effects on the environment, forests, and other natural resources. PASS3 activities do not diverge significantly from the original, planned activities. Policy Area II advances a package of policy measures to improve budget management to support the joint performance of the revamped CCT Solidaridad, particularly in its planning and execution of resources to close supply gaps in education, health, and nutrition. The Bank team is closely monitoring the Government’s execution of these resources, particularly processes of new construction of schools and clinics for their adherence to national environmental standards, practices, and legal frameworks. V. Tentative financing Source: ($m.) Borrower 0 International Bank for Reconstruction and Development 70.0 Others (specify) Total 70.0 VI. Contact point World Bank Contact: Carine Clert Title: Sr. Social Protection Specialist Tel: (202) 458-4913 Fax: (202) 522-0550 Email: cclert@worldbank.org Borrower Contact: Roberto Cabañas Title: Director of Negotiations, General Directorate for Public Credit, Ministry of Finance Tel: (809) 687-5131 Ext. 2358 Email: rcabanas@creditopublico.gov.do VII. 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