Public Disclosure Copy The World Bank Implementation Status & Results Report West Bank and Gaza: Fiscal Stability and Business Environment DPG (P161252) West Bank and Gaza: Fiscal Stability and Business Environment DPG (P161252) MIDDLE EAST AND NORTH AFRICA | West Bank and Gaza | Macroeconomics, Trade and Investment Global Practice | Special Financing | Development Policy Lending | FY 2018 | Seq No: 1 | ARCHIVED on 02-May-2018 | ISR32094 | Implementing Agencies: Ministry of Finance and Planning, Ministry of Finance and Planning Key Dates Key Project Dates Bank Approval Date:05-Dec-2017 Effectiveness Date:12-Dec-2017 Planned Mid Term Review Date:-- Actual Mid-Term Review Date:-- Original Closing Date:30-Apr-2019 Revised Closing Date:30-Apr-2019 Program Development Objectives Program Development Objective (from Program Document) Project Development Objective The operation will support the PA's efforts to improve its fiscal resilience, build public institutions, and improve the business climate. Board Schedule Comments PHRPDODEL Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  --  Satisfactory Overall Implementation Progress (IP)  --  Satisfactory Overall Risk Rating  --  High Implementation Status and Key Decisions A World Bank (WB) team carried out an implementation support mission for the West Bank and Gaza Fiscal Stability and Business Environment Development Policy Grant (DPG) in the Palestinian territories from January 28 to March 1, 2018. The team met with various ministries and officials of the Palestinian Authority (PA) as well as the Bank sector specialists to: a) follow up on the progress made in the reform areas supported under the World Bank’s 2017 budget support operation, and b) have broader discussions on the prospects for future budget support in light of the World Bank's Assistance Strategy for 2018-2021. Overall, the PA has made steady progress in the reform areas supported under the 2017 DPG since its Board approval in December 2017. Below are some details on the progress achieved under each prior action; Pillar 1 - Improve transparency of fiscal transfers to local service providers: Prior Action 1: At the direction of the Palestinian Energy and Natural Resources Authority (PENR), at least 90 percent of all municipalities, village councils, and Distribution Companies have opened a separate bank account to deposit funds collected from electricity bills to pay the Palestinian Electricity Transmission Company (PETL). Almost all electricity distributors have opened separate bank accounts to deposit funds collected from electricity bills to pay the PETL as of today (the evidence is pending). Signing of a new long-term Power Purchase Agreement (PPA) between PENRA and the Israeli Electric Corp is still under discussion pending on an agreement on the payment guarantee. Once signed, PETL will 5/2/2018 Page 1 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report West Bank and Gaza: Fiscal Stability and Business Environment DPG (P161252) start taking over the connection points in a phased manner and should eventually become the single buyer in a few years. Prior action 2: At the direction of the Palestinian Water Authority, at least five (5) Local Government Units (LGUs) have opened a separate bank account to deposit funds collected from household water bills to pay the West Bank Water Department. Palestinian Water Authority (PWA) initiated a pilot project that eight LGUs (Hebron, Yatta, Salfeet, Jenin, Tubas Joint Water Services Council, Tulkarem, Qalqilia, and Jericho), open separate bank accounts to deposit revenues collected by LGUs from household water bills, with the plan to extend it to the rest of LGUs in due course. All eight LGUs have opened separate bank accounts so far. By the end of 2018, the PWA aims to put in place a national framework for sustainable municipal water utilities and has already drafted about 10 regulations to help achieve the goal, including the National Water Company Bylaw, Regional Water Utilities Bylaw, the tariff Bylaw, and the licensing Bylaw. Prior Action 3: The Ministry of Health has: (i) signed a Memorandum of Understanding (MoU) to establish a framework over the purchase of referral services with at least six (6) national hospitals; and (ii) published harmonized standard procedures for medical referrals online. With the aim to reduce the oversized spending on Outside Medical Referrals (OMRs), the Ministry of Health (MoH) have signed 7 MoUs with Palestinian non-governmental hospitals in 2017. The Services Purchasing Unit (SPU) has successfully produced a number of manuals and referral protocols for medical referrals. The SPU is reviewing them on a regular basis to ensure they remain updated. Prior action 4: The Ministry of Finance and Planning has issued an instruction mandating the Accounting Department at the Ministry of Finance and Planning and the Projects Department of the Ministry of Local Governments to produce annual reports that include information on: (i) the amount of Ministry of Local Government’s capital budget allocated by the Ministry of Local Government per LGU; (ii) the amount of revenue deductions or interceptions by the Ministry of Finance and Planning per LGU; and (iii) an annex to the existing transportation fees report with the breakdown of each LGUs’ share based on the endorsed allocation criteria by the Council of Ministers. Information on local revenues generated during a fiscal year and the allocation to LGUs for the following fiscal year are provided by the MoFP to the MoLG on the 15th of January of each year. The MoLG confirmed that this reporting process is indeed carried out and informed the Bank team that the MoFP has decided to stagger the disbursement to LGUs in eight instalments, in particular, for property tax. Pillar 2: Improve the business environment Prior action 5: The Ministry of National Economy has established and implemented the movable assets registry, which allows firms to secure loans and other financing by using movable assets. The IFC team has been supporting the Ministry of National Economy (MoNE) in ensuring knowledge transfer and a smooth operation of the registry through workshops. Awareness raising events and training sessions for MoNE IT staff were held last year. The Palestinian Monetary Authority (PMA) has been playing a key role to promote the use of the online registry in collaboration with commercial banks. Presently, the PMA and the Bank of Palestine are working to resolve technical issues pertaining to the e- payment mechanism. Prior action #6: The Ministry of National Economy has submitted to the Council of Ministers a new Companies Law that included simplified business registration procedures, new types of companies and shares, and good practices for protecting minority investors and resolving insolvency. The Bank team, together with the Ministry of National Economy (MoNE) advisors and local lawyers have been reviewing the draft Companies law to include good practices, taken also into account the comments of the private sector. A revised draft of the law is expected to be presented by the MoNE to the Council of Ministers for the second reading at the beginning of April 2018. Prior action #7: The Ministry of Health, in collaboration with the Ministry of National Economy, has submitted to the Council of Ministers amendments to the Annexes of the Law of Crafts and Industries of 1953 (updating the 3-tier classification of the approvals requested for licensing businesses and the fee structure for licensing. The draft decree supporting the municipal licensing reform has been on the Council of Ministers’ agenda for the first and second reading in December 2017 and February 2018, respectively. The Bank team has been providing TA to the MoNE throughout the approval process. After addressing the last round of comments received, the decree will be submitted to the Council of Ministers for the third reading or approval by the end of March 2018. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  --  High 5/2/2018 Page 2 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report West Bank and Gaza: Fiscal Stability and Business Environment DPG (P161252) Macroeconomic  --  --  High Sector Strategies and Policies  --  --  Moderate Technical Design of Project or Program  --  --  Moderate Institutional Capacity for Implementation and Sustainability  --  --  Moderate Fiduciary  --  --  High Environment and Social  --  --  Low Stakeholders  --  --  Moderate Other  --  --  -- Overall  --  --  High Results Results Indicators PHINDIRITBL  Share of electricity purchased from the IEC through the PETL (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 2017 data will be Value 86 percent -- 100 percent available in mid-2018. Date 30-Jun-2016 -- 05-Apr-2018 31-Dec-2019 PHINDIRITBL  Accumulated debts of 5 LGUs for bulk water purchased to the WBWD (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The total amount of debts accumulated by five LGUs (Hebron, Yatta, Salfeet, Jenin, and Tubas) to the WBWD (as of Dec 2017) = NIS250,344,194/US$71, 526,913 (US$1.0=NIS3.5). Lower than the Value US$ 275 million -- Note. The baseline baseline indicator (US$275 million) shows the total amount of accumulated debts by all the LGUs to the WBWD (not five LGUs). The correct baseline should be: The total amount of debts accumulated by 5/2/2018 Page 3 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report West Bank and Gaza: Fiscal Stability and Business Environment DPG (P161252) five LGUs (Hebron, Yatta, Salfeet, Jenin, and Tubas) to the WBWD. Baseline (Dec 2016) = NIS254,357,880 (US$72,673,680 equivalent). The baseline should be corrected when the ICR is conducted Date 31-Jul-2017 -- 05-Apr-2018 31-Dec-2019 PHINDIRITBL  The average annual growth of total health referrals cost. (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target No actual total health referral cost for 2017 is available as of today. The MoH has not settled the payments as they have not received all the invoices. The only actual costs available at this stage is those for the Israeli hospitals because For the period 14.5 percent (for the period the system in place 2017-2019, Value -- 2014-2016) captures the costs, lower than the which can be verified baseline with the monthly deductions from the PA through the clearance revenue. The referral costs for other hospitals (non-Israeli) will be available in the Annual Report to be issued in June/July each year. Date 30-Jun-2017 -- 05-Apr-2018 31-Dec-2019 PHINDIRITBL  Annual reports published online that specify: (i) the amount of Ministry of Local Government’s capital budget allocated by the Ministry of Local Government per LGU; (ii) the amount of revenue deductio (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The MoLG has already Annual shared the data required information for reports with the (2018 onwards MoFP in the beginning for the Value No reports published -- of the year. The MoFP is interception currently validating the report and 2017 data. Three reports onwards for (capital budget other reports) 5/2/2018 Page 4 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report West Bank and Gaza: Fiscal Stability and Business Environment DPG (P161252) allocation, interceptions, made available and an annex to the online existing transportation report) are expected to be published on line by early 2019, as planned. Date 30-Sep-2017 -- 05-Apr-2018 30-Sep-2019 PHINDIRITBL  Number of registration notices filed in the collatoral registry (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Number of registration Value Zero -- filled (February 2018) = At least 300 282. Date 30-Jun-2016 -- 05-Apr-2018 30-Jun-2019 PHINDIRITBL  Number of firms formally incorporated (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Once the Companies Law is adopted and At least 15 Value 1,783 -- implemented, the percent indicators will be increase evaluated. Date 30-Jun-2016 -- 05-Apr-2018 30-Jun-2019 PHINDIRITBL  Number of days on average to issue a business license (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Once the Companies Law is adopted and Value 36 days -- implemented, the 15 days indicators will be evaluated. Date 30-Jun-2016 -- 05-Apr-2018 30-Jun-2019 5/2/2018 Page 5 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report West Bank and Gaza: Fiscal Stability and Business Environment DPG (P161252) PHINDIRITBL  Fee to license an activity (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Once the Business License decree is adopted and Flat fee of JD Value Ranging from JD 24 to 144 -- implemented, the 25 indicators will be evaluated. Date 30-Jun-2016 -- 05-Apr-2018 30-Jun-2019 Overall Comments Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P161252 TF-A5996 Effective USD 30.00 30.00 0.00 30.00 0.00 100% P161252 TF-A6118 Effective USD 34.47 34.47 0.00 34.47 0.00 100% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P161252 TF-A5996 Effective 06-Dec-2017 06-Dec-2017 12-Dec-2017 30-Apr-2019 30-Apr-2019 P161252 TF-A6118 Effective 06-Dec-2017 06-Dec-2017 21-Dec-2017 30-Apr-2019 30-Apr-2019 Tranches Restructuring History There has been no restructuring to date. Related Operations 5/2/2018 Page 6 of 7 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report West Bank and Gaza: Fiscal Stability and Business Environment DPG (P161252) There are no related projects. 5/2/2018 Page 7 of 7 Public Disclosure Copy