Colombia - Technical Assistance Loan to Support the Second Programmatic Labor Reform and Social Structural Adjustment Loan Project

Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 29332-CO PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN INTHEAMOUNT OFUS$2.0MILLION TO THE REPUBLIC OF COLOMBIA FOR A TECHNICAL ASSISTANCE LOAN TO SUPPORT THE SECOND PROGRAMMATIC LABOR REFORM AND SOCIAL STRUCTURALADJUSTMENT LOAN(PLaRSSAL 11) October 5, 2004 HumanDevelopment Sector ManagementUnit Colombia-Mexico Country ManagementUnit LatinAmerica andthe CaribbeanRegion This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective 08/12/2004) Currency Unit = Colombian Peso (COP) 2,594.50 COP = US$1 US$0.0003854 = COP 1 FISCALYEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS A R S Insurance Entities o f Subsidized Regimes (Administradoras del Regimen Subsidiado) C A P Centers of Integrated Care for Preschool Children (Centros deAtencidn Integral a1 Preescolar) CAS Country Assistance Strategy CCF Worker's Family Assistance Funds (Cajas de CompensacidnFamiliar) CFAA Country Financial Accountability Assessment CNSSS National Council o f Social Security inHealth (Consejo Nacional de Seguridad Social en Salud) CONPES Nacional Council o f Economic and Social Policy (Consejo Nacional de Politica Econdmica y Social) CPAR Country Procurement Assessment Report CPI Consumer Price Index DANE National Administrative Department o f Statistics (Departamento Administrativo Nacional de Estadistica) DAPRE Administrative Department o f the President o f the Republic (Departamento Administrativo de la Presidencia de la Repziblica) DNP National PlanningDepartment (Departamento Nacional de Planeacidn) DPT Diptheria, pertussis, tetanus (immunization) ENCV National Survey o f the Quality o f Life (EncuestaNacional de la Calidad de Vida) EPS Insurance Entitieso f Contributory Regimes (Empresas Promotoras de Salud) FBS Selection under a FixedBudget FIAL Programmatic Fiscal and Institutional Adjustment Loan FOSYGA Health Care Sector Fund(Fondo de Solidaridady Garantia) FY Fiscal Year GDP Gross Domestic Product GOC Government o f Colombia HCB Community Childcare Centers (Hogares Comunitarios de Bienestar) IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICBF Colombian Institute for Family Welfare (Instituto Colombiano de Bienestar Familiar) ICFES Colombian Institute for the Achievement o f Higher Education(Instituto Colombiano para el Foment0 de la Educacidn Superior) I C T Information and Communications Technology ICR ImplementationCompletion Report IDA International Development Association 11 ..  IDB Inter-American Development Bank IMF International Monetary Fund I N S National Health Institute (Instituto Nacional de Salud) IPS Health Care Providers ISS Social Security Institute (Instituto de Seguridad Social) LCS Least-Cost Selection LIL Learning and Innovation Loan M C Community Caregivers (Madres Comunitarias) MEN Ministryo fEducation M&E Monitoringand Evaluation MHCP MinistryofFinance (MinisteriodeHacienday Cre'ditoPublico) MSP Ministryof SocialProtection NGO Non-Governmental Organization NTS National Training System P A D Project Appraisal Document PACES Program for Expanding Coverage o f Secondary Education (Programa deAmpliacibn de la Cobertura de Educacibn Secundaria) PAHO Pan-AmericanHealth Organization PA1 Expanded Program o f Immunizations (Programa Ampliado deImmunizaciones) PCU Project CoordinationUnit P D ProgramDocument PHRD Policy and Human Resources Development Fund PIP Project ImplementationPlan PIU Project ImplementationUnit PLaRSSAL Programmatic Labor Reform and Social Structural Adjustment Loan QBS Quality-Based Selection RAS Social Safety Net (Red deApoyo Social) RSS Social Solidarity Network (Red de Solidaridad Social) SAT Tutorial Learning System (Sistema de Aprendizaje Tutorial) scs Social Control System SDR Special DrawingRights SECAL Social Sector Adjustment Loan SENA National [Technical] Training Institute (Sewicio Nacional deAprendizaje) SISBEN Beneficiary Selection System (Sistema de Seleccibn de Benejkiarios) SPS Social ProtectionSystem SSR Social Risk System (Sistema Social deRiesgo) TAL Technical Assistance Loan TOR Terms o f Reference UPC RiskAdjusted Health Insurance Per Capita Payment (Unidad dePagoper Capita) Vice President: Davidde Ferranti Country Director: Isabel Guerrero Sector Director Ana-Maria Arriagada Sector Manager: HelenaRibe Country Sector Leader Mark Hagerstrom Task Team Leaders: Vicente Paqueo and Wendy Cunningham iii   CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues................................................................................................ 1 2. Rationale for Bank involvement ..................................................................................... 1 3. Higher level objectives to which the Project contributes................................................ 2 B . PROJECTDESCRIPTION ................................................................................................. 3 1. Lendinginstrument ......................................................................................................... 3 2. Program objective and phases......................................................................................... 3 3. Project development objective and key indicators.......................................................... 3 4. Project components ......................................................................................................... 3 5. Lessons learned and reflectedinthe Project design ....................................................... 5 6. Alternatives considered andreasons for rejection.......................................................... 6 C. IMPLEMENTATION .......................................................................................................... 6 1. Partnership arrangements................................................................................................ 6 2. Institutional and implementation arrangements .................................................................... 7 3. Monitoring and evaluation o f outcomes/results .............................................................. 7 4. Sustainability................................................................................................................... * . . 8 5. Critical risks and possible controversial aspects............................................................. 8 6. Loan conditions and covenants ....................................................................................... 8 D APPRAISAL SUMMARY . ................................................................................................... 9 1. Economic and financial analyses.................................................................................... 9 2. Technical......................................................................................................................... 9 3. Fiduciary ......................................................................................................................... 9 4. Social............................................................................................................................... 9 5. Environment.................................................................................................................... 9 6. Safeguardpolicies ......................................................................................................... 10 7. Policy exceptions and readiness.................................................................................... 10 Annex 1: CountryandSector Background .............................................................................. 11 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies .................16 iv  Annex 3: Results Framework and Monitoring ........................................................................ 19 Annex 4: DetailedProject Description ...................................................................................... 25 Annex 5: Project Costs............................................................................................................... 34 Annex 6: Implementation Arrangements ................................................................................. 36 Annex 7: Financial Management and DisbursementArrangements ..................................... 38 Annex 8: Procurement Arrangements ...................................................................................... 40 Annex 9: Economic and Financial Analysis ............................................................................. 43 Annex 10: Project Preparation and Supervision ..................................................................... 44 Annex 11: Documents in the Project File ................................................................................. 45 Annex 12: Statement of Loans and Credits .............................................................................. 46 Annex 13: Country at a Glance ................................................................................................. 48 Map: IBRD31251R V  COLOMBIA TECHNICAL ASSISTANCE LOANTO SUPPORT THE PLaRSSAL I1 PROJECT APPRAISAL DOCUMENT LATINAMERICA AND CARIBBEAN LCSHS-DPT Date: August 30, 2004 Team Leaders: Vicente Paqueo and Wendy Cunningham Country Director: Isabel M.Guerrero Sectors: Other social services (45%);Health Sector Managermirector: (30%);Primary education (15%);Secondary Helena G. Rbe/Ana-Maria Arriagada education (10%) Themes: Social riskcoping (P);Other social protectionand riskmanagement (P);Education for all (P);Social riskreduction (P);Education for the knowledge economy (S) Project ID:PO88857 Environmentalscreening category: Not Required LendingInstrument: TAL Safeguard screening category: N o impact [XI Loan [ ] Credit [ ] Grant [ 3ProjectFinancingData Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 2.0 Proposedterms: Fixed Spread Loan (FSL) Grace period (years): 10.5 Commitment fee: 0.85% Front end fee (FEF): 0.5% Initial choice o f interest-rate basis: suitability to the country's external debt portfolio Type o frepayment schedule [X ] Commitmentlinkedwiththe following repaymentmethod: Tailored [ ] Linkedto Disbursement FinancingPlan(US$m) Source Local Foreign Total BORROWER 0 0 INTERNATIONALBANKFOR 2.00 2.00 RECONSTRUCTION AND DEVELOPMENT Financing Gap Total: 2.00 2.00 Borrower: Republic o f Colombia ResponsibleAgencies: DNP,MSP,MEN(MSP=PCU) Contact: Ramiro Guerrero, Technical Vice-Minister Ministryof SocialProtection Carrera 13 #32-76, 22ndFloor -Bogota, Colombia Tel: 571-336 5066 ext. 2210 - Email: rguerreroc@minproteccionsocial.gov.co vi  The CAS didnot envision the TAL inits list o fprojects. However, during preparation o f PLaRSSAL I, Bank and the GOC agreed that a small TAL the would be desirable to provide highly selective support to improve GOC's capacity Re$ PAD D.? Have these been approved by Bank management? I s approval for any policy exception sought from the Board? [ ]Yes [ x ] N o Does the Project include any critical risks rated "substantial" or "high"? Re$ PAD C.5 [x]Yes [ ] N o Does the Project meet the Regional criteria for readiness for implementation? Ref:PAD D.7 [x]Yes [ ] N o Project development objective Re$ PAD B.2, TechnicalAnnex 3 The project would assist the Department o fNational Planning(DNP) and the Ministries o f Social Protection(MSP) and Education (MEN) to improve their knowledge, develop effective instruments, and strengthen their ability to carry out reforms supportedby the Programmatic Labor and Social Structural Adjustment Loan (PLaRSSAL). Project description Re$ PAD B.3.a, TechnicalAnnex 4 The project would fund selected analytical, advisory and consensus building activities o f the MSP, the MENandthe DNPto promoteresults-based managementofreforms andto strengthen: (i)MSP's capacity to implement a coherent social protectionreformthat encompasses employment, training, health and social assistance for the poor and vulnerable (Component 1); (ii)MEN'Sability to implement education decentralization reforms mandated by Law 715 more effectively, analyze primary and secondary school integration and evaluate the school readiness o f 5-year old children (Component 2); and (iii) capacityforinstitutionalizingperiodicevaluationandmonitoringofnationalsocialprograms DNP's for citizens' oversight and feedback (Component 3). Which safeguard policies are triggered, if any? Re$ PAD D.4, TechnicalAnnex 10 NONE Significant, non-standard conditions, if any, for: Re$ PAD C.7 Boardpresentation: November 4,2004 Loan effectiveness: January 31,2005 Covenants applicable to Project implementation: None vii  A. STRATEGIC CONTEXT AND RATIONALE 1. Country andsector issues Since its economic crisis at the close o f the 20` Century, Colombia has achieved economic and social progress. With its economy growing at over 3 percent annually and the unemployment rate recently declining by 3 percentage points to 14 percent, poverty rates have begun to decline for the first time in seven years and security has improved, as indicated by a decrease in the number o f ludnappings and the increasingpresence o f government forces inthe more violent regions o f the country. However, difficult challenges remain, as discussed in the accompanying Program Document o f the Second Programmatic Labor and Social Structural Adjustment Loan (PLaRSSAL 11). Colombia continues to suffer from high levels o f poverty. Many children remain vulnerable to illness and, while substantial resources are spent on health, a high proportion o f families still lack adequate protection against financial losses from illness and they lack good quality basic health care services. Moreover, Colombia lags behind similar countries in the level and quality o f education and training, which undermines the country's prospects for long-term competitiveness and growth. Complicating the situation i s the violent conflict that continues to consume a large portion o f the budget and leads to social strife, by displacing millions o f citizens from their homes and increasing the burden on the country's still inadequate social protection system. To address these challenges, the Government o f Colombia (GOC) has developed an ambitious labor and social reform agenda. The GOC has initiated many sweeping policy and structural reforms over the last few years to improve the performance o f the social sector and the functioning o f the labor market (see accompanying PLaRSSAL I1Program Document). These reforms include, inter alia: (i) the creation o f the new Ministry o f Social Protection(MSP), generated through a merger o f the Ministries o f Health and Labor, to oversee and coordinate all social protection, health and labor policies, regulations, and programs; (ii) implementationo f the decentralization law (Law 715) o f the year 2001; (iii) amendment an o f Law 60 o f 1993 (modifying the formula for transferring education and healthresources to departments and municipalities in order to promote efficiency and service quality); and (iv) the enactment o f the labor reform Law 789 o f December 2002, which seeks to lower the costs o f labor and provide more flexibility to labor contracts. Ifproperly implemented, these reforms are expected to increase employment andproduce significant and sustained improvements in the existing systems o f social protection, health and education and worker training. The GOC has requested technical assistance to implement these reforms effectively and to measure results. While the GOC staff i s highly competent, there may not be sufficient time for staff to both carry out the normal work required by social agencies and to ensure timely and sustained implementation and monitoring o f these new reforms. It i s expected that when the proposed Technical Assistance Loan (TAL) i s completed, key staff o f participating agencies would have improved their knowledge, analytical tools, and ability to advance human development reforms and manage those reforms for results. 2. Rationalefor Bankinvolvement Duringthe deliberation o f the FirstProgrammatic Labor Reform and Social Structural Adjustment Loan (PLaRSSAL I), it was agreed that technical assistance support would help to reduce implementationrisks and promote the sustainability o f the PLaRSSAL reforms. The Bank i s arguably well-positioned to be involved inthe project. First, the value-added o f its assistance i s highdue to its technical expertise in the above-mentioned reform areas. This expertise has been established through its high-quality regional and 1  country-level analytical and advisory work. Second, the Bank has developed close rapport with the GOC and a credible reputation on social and labor reform issues through its series o f analytical pieces and investment and adjustment lending operations in human development, including social protection. Sustained involvement in those issues since the economic crisis in 1998/99 permitted the GOC and the Bank to develop a deep and common understanding o f issues affecting the efficiency and effectiveness o f social spending. The TAL builds on the foundations o f previous Bank-supported sector work and lending programs, especially the SECAL' and the PLaRSSAL,2 and expands on this work through strengthening support for the implementation o f their ambitious reform programs. This TAL would, however, address only a limitednumber o f activities, complementing actions funded by a PHRD grant for the preparation of the PLaRSSAL I1(effective April 15, 2004) and supplementing the current assistance provided to the GOC by the Inter-American Development Bank (IDB). Bank-IDB collaboration on social and labor reform issues in Colombia has been extensive. The current Country Assistance Strategy (CAS), approved by the Executive Directors on January 9, 2003, gives highpriority to the reforms supported by the PLaRSSAL and TAL operations; the proposed project fits very well with the CAS since it would provide critical support to the implementation of the discussed reforms. Inparticular, technical assistance i s necessary to craft more adequate regulation o f the new laws, design appropriate implementation instruments, develop detailed operational procedures and information systems, and build institutional capacity to monitor and evaluate the results o f the various reforms. If successful, the TAL would contribute to the CAS objective o f poverty reduction through increased employment, improved education and training, and more effective social protection. 3. Higher level objectives to which the Project contributes The TAL operation will contribute to achieving two higher-level GOC objectives supported by the CAS. The first i s buildingquality government. The TAL contributes to the development o f quality government by supporting institutional strengthening to enable reforms that seek to promote the transparency, social accountability, coordination, and rationalization o f key social programs and institutions. These include the Ministryo f Education (MEN), the MSP, the Colombian Institute for Family Welfare (ICBF), and the National Training Institute (SENA). In addition, the operation will expand the participation of Colombia's citizens and the ability o f beneficiaries to make choices and informed decisions. Such actions are expected to reduce inefficiencies and to improve relations between Colombian citizens and their government. The second higher-level objective that the TAL will support i s improved sharing o f the fmits o f growth. The labor, education, training, social assistance, and health reforms supported by both the PLaRSSAL and TAL would enhance the ability o f all people, especially the poor, to share inthe fruits o f economic growth. Specifically, increased employment, which i s the single most important source o f income for poor people, would be an important factor for greater equality. It can also be argued that improved cost-effectiveness and targeting o f the ICBF and SENA programs to low-income people would reduce welfare inequality. The CAS did not envision the TAL in its list o f projects. However, during preparation o f PLaRSSAL I, the Bank and the GOC agreed that a small TAL would be desirable to provide highly selective support to improve GOC's capacity to implement the PLaRSSAL program and manage it for results. Social Sector Adjustment LoanProject (7134-C0), approvedAugust 1,2002. PLaRSSAL IapprovedSeptember, 2003, PLaRSSAL I1i s under preparation. 2  B. PROJECT DESCRIPTION 1. Lendinginstrument The project uses a TAL to support the PLaRSSAL 11. The TAL is an appropriate instrument for purposes o f this project because it allows enough time to study, design, test, and implement the reforms supported by the PLaRSSAL. The Borrower selected the financial terms indicated inthe cover sheet because they are appropriate to its needs. 2. Programobjectiveand phases (Not applicable) 3. Projectdevelopmentobjectiveand key indicators The project would assist the Department of National Planning (DNP) and the Ministries of Social Protection (MSP) and Education (MEN) to improve their knowledge, develop effective instruments, and strengthen their ability to carry out reforms supported by the Programmatic Labor and Social Structural Adjustment Loan (PLaRSSAL). Specifically, the project's main development objectives include the promotion o f results-based management o f reforms and the strengthening of: (i)MSP's capacity to implement a coherent social protectionreform that encompasses employment, training, health and social assistance for the poor and vulnerable; (ii)MEN'Sability to implement education decentralization reforms mandated by Law 715 more effectively, analyze primary and secondary school integration and evaluate the school readiness o f 5-year old children; and (iii) DNP's capacity for institutionalizing periodic evaluation and monitoring o f national social programs for citizens' oversight and feedback. Through these objectives, the project would improve the ability o f the Ministries o f Social Protection and Education and the DNP to monitor, evaluate and manage for results the various reforms for which they are responsible. Moreover, the expected incorporation o f the knowledge, ideas, and tools developed and implemented by staff with support from external TAL consultants would significantly contribute to institutional capacity building. The key performance indicators o f the project would include completion o f agreed analytical, advisory, and consensus-building activities in support o f the above-mentioned labor and social reforms (Annex 3). As an indicator o f capacity building, the Project would also monitor measures actually taken by DNP, MSP, and MEN to systematically monitor and evaluate their programs and to use the monitoring and evaluationresults to inform policy and program decisions. 4. Projectcomponents The loan would finance the analytical, advisory and consensus-building activities o f the following three project components: technical assistance to the Ministry o f Social Protection (Component l), technical assistance to the Ministry o f Education (Component 2) and technical assistance to the DNP (Component 3). These activities include, inter alia, design o f information systems, data collection and analysis, staff training, expert advice on needed regulations/decrees/policy documents to advance the reforms, piloting innovative schemes, workshops to disseminate findings and recommendations among public and private stakeholders, buildingpartnerships with civil society, and adoption o f the new institutionalmechanisms to be financed under the TAL operation. Although the size o f the proposed loan i s small due to limited fiscal space, the TAL i s adequate to complement related activities supported by the Bank and its partners through other operations (see Annex 3  2 and C.1). Together, the proposed TAL and these other operations would contribute to building the institutional capacity of the MEN, the MSP and the DNP to develop the labor and social sector reforms and to manage those programs with the goal o f improving outcomes. The other planned operations include: (i)the data collection and analytical work that the Bank and IDB are fundinginparallel (e.g. Red de Apoyo Social (RAS), Sistema de Seleccidn de Benejkiarios (SISBEN) updating, and evaluation studies); and (ii)the PHRD-supported activities (see Table 2.1, Annex 2) which the TAL would continue to support. A brief description o f each TAL component follows; details are inAnnex 4. Component 1: Technical Assistance for MSP (US$l.l million). The Social Protection System, as envisioned by the MSP, has five key areas that this component would cover: (i) labor market policies such as training, wage subsidies, and social assistance to the unemployed; (ii) social assistance to vulnerable groups including young children, adolescents and the elderly poor; (iii) a financial model o f the Social Protection System (SPS); (iv) regional dimensions o f the SPS; and (v) monitoring and evaluation systems. Coordination o f all these programs i s an enormous institutional challenge for the MSP, since most of these programs are run by separate semi/autonomous agencies including the ICBF, SENA, the workers' family assistance program (Cajas de CompensacidnFamiliar) and other non-governmental institutions. This first component would provide technical assistance to the MSP to ensure timely, sustained, and effective implementation o f health, labor, training and social assistance reforms. Specifically, it would finance the hiring o f consultants who would work with the DNP, the MEN, and the MSP to: (a) develop the implementation strategies and instruments needed to implement reforms o f the ICBF, SENA, the Cajas de Compensacidn Familiar and other institutions; (b) undertake diagnostic studies and develop alternative institutional arrangements for the training and social protectionprograms, including early child education, programs for adolescent and unskilled youth, and support for the elderly who have no formal social assistance; (c) develop a system of output-based indicators for monitoring progress in the achievement o f agreed social protection system targets; and (d) establish an impact evaluation system for the main social protectionprograms under the MSP and develop household surveys to allow these impact evaluations. The TAL would complement other GOC and Bank operations in the monitoring and the evaluation o f the actual results on employment from implementation o f Law 789. The technical support to the MSP would help it improve coordination between large programs, such as SENA, the ICBF and Cajas de CompensacidnFamiliar, by establishing working agreements based on the new division o f responsibilities inwhich the MSP assumes a policy making, coordinationand supervision role, and by developing the information systems and channels to achieve coordination. The MSP would develop verification mechanisms by analyzing databases o f program beneficiaries to ensure that all programs follow targeting criteria established by the MSP. Finally, the TAL would help the GOC address several intersectoral issues between the MSP and the MEN. For example, the TAL would help clarify and advance implementation of the new roles of the MSP and the MEN in the new National Skills Formation System as proscribed in the recent CONPES d~cument.~In this framework, the MSP assumes the role o f policymaking and certifies training programs, which was previously done by SENA, and the MEN oversees the technical aspects o f training. SENA has the responsibility for providing specified training under certain conditions and regulations. Component 2: TechnicalAssistanceto the MEN(US$450,000). The objective o f this component is to strengthen the MEN'Scapacity to implement four key reform activities supported by the PLaRSSAL Program (Annex 4 describes details o f those activities). The first activity i s implementation o f the education reform provisions o f Law 715, which transfer resources from the central to departmental and municipal levels largely on the basis o f enrollment. While this allocation scheme i s a sound approach for CONPESNo. 81 from July, 26,2004. 4  increasing efficiency, improving equity across territorial entities, and promoting rationalization o f the teaching force, it requires good auditing and control systems to minimize fraud and to ensure the accuracy o f obtained information. Initial auditing activities have already been carried out successfully in a few selected municipalities usingresources from the Japanese PHRD Grant and others. The second activity, to be implemented jointly with the DNP, supports the analysis o f the new revenue sharing system between the national and local government. Specifically, it reviews the impact on equity, patterns o f resource utilization, education outputs and utilization o f the teaching force indifferent areas o f Colombia. The third activity, to be conducted separately for different types o f schools, i s to evaluate the organizational and pedagogical effects o f the integration o f primary and secondary education in the same school and to propose actions for improvement. The final activity i s to evaluate the abilities that five year old children should have in language, mathematics, natural science and civic before beginning the first grade o f primary education. The aim i s to improve educational policies and programs according to the development and learningneeds o f those children. Component 3: Technical Assistance to DNP (US$450,000). The TAL would support the effort o f the DNP's Public Policy Evaluation Unit (formerly Sinergia) to strengthen citizen monitoring, evaluation, transparency and social accountability. The project would support, in conjunction with other activities, the following actions: (a) an evaluation study o f the general participation system (revenue sharing) including the adequacy o f the instrument and formula used and the results o f their application (this study would be undertakenjointly with the MEN);4and (b) the continuation o f detailed design, implementation and institutionalizationo f the social control system that the DNP i s developing based on an adaptation o f the successful Bogoth, Como Vamos?Program. The DNP's Public Policy Evaluation Unit has already made significant progress in establishing a system to monitor progress against targets for most central government institutions and programs covered in the National Development Plan. It also has taken steps towards the institutionalizationo f a system for impact evaluation o f major social programs, including carrying out an impact evaluation o f the Red de Apoyo Social (RAS) or Social Safety Net program, and the achievement o f a consensus in the GOC to include a requirement for periodic impact evaluation o f major programs in Colombia's National Budget Law. This component would further advance a culture o f impact evaluation and the ability o f citizens to give feedback on the performance o f government programs. From the institutional point o f view, the TAL would permit the DNP's Public Policy Evaluation Unit to undertake more key evaluation studies and learn from those studies, develop better monitoring and evaluation instruments, and develop institutional support for impact evaluation. 5. Lessons learned and reflected in the Project design The TAL was preparedand designed withthe following key lessons inmind: First, human development and social protection issues, particularly considering the Millennium Development Goals, are multisectoral innature and therefore require a multisectoralapproach. Second, in addressing multisectoral issues, it i s important to be selective and coherent, and to focus on highpriority reforms to which the government is fully committed. Third, emphasizing outputs rather than inputs and processes facilitates monitoring o f progress and achievement o f results. A focus on key program outcomes permits the inclusion o f many sectors in the operation, which would be difficult to manage in a series o f operations if the outcomes for each sector This studywouldbe co-financedwiththe IDB,whichis providingabout US$1.O million for this study. 5  were not clearly defined and measurable. This also permits the incorporation o f sectors where reform efforts are more advancedthan inothers. Fourth, phasing i s important and process-related activities help to lay the needed groundwork for results- oriented measures. Fifth,the value added o f Bank support is greater when the support is part o fa consistent series of lending operations and when it i s part o f a strong policy dialogue based on a common understanding and high quality collaborative analyses o f key issues. A series o f operations, including the social safety net investment loans, SECAL, PLaRSSAL I,and PLaRSSAL 11,commit the government and the Bank to stay focused on monitoring progress in outputs o f key reform measures over a longer time period in a coordinated, formal and systematic way. The agreed set o f outcome indicators, and the evaluation o f those outcome indicators with the beginning o f each new operation, allows for new strategies to be implemented when the previous strategies did not return the expected results. Constant collaboration between the GOC, the Bank, and other partners i s crucial to developing the new foundation for health, education, and social reforms. Sixth, the success o f a continued series o f multisectoral operations i s mainly due to the ability o f the various government agencies (DNP,Ministryo f Finance (MHCP), MSP, MENand other line agencies) to work collaboratively and to respect each other's competencies. The DNP has played a strong coordinating role in ensuring that the entities involved are making progress in achieving agreed output targets and in meeting the triggers. This ensures continuation o f reform efforts over a longer period o f time and permits detection o f delays or problems that needto be addressed early inthe process. Recognizingthese lessons, the TAL has been designed to support multisectoral activities, but it i s focused on high-priority activities needed to facilitate reforms that support human development goals. The project components and activities were selected by the DNP, the MSP and the MENbased on issues identified from information and experience with studies and lending operations financed by the Bank and IDB. Moreover, the project's institutional arrangements are designed so that these ministries have the necessary autonomy to prepare and implement their respective components efficiently, while at the same time establishing technical bodies to manage coordination, quality assurance, and accountability required by Bank norms. 6. Alternatives considered and reasons for rejection One alternative was considered that relates to the size o f the loan. Initially, a loan o f about US$5.0 million was discussed. However, due to tight fiscal space, it was decided to keep the loan amount at US$2.0 million, with other operations filling in and participating agencies improving their coordination. Another possibility considered was to include, as a condition o f PLaRSSAL 11, a government commitment allocating an amount to support technical activities to support implementation o f PLaRSSAL reforms in the national budget. Yet, Bank experience indicates that this approach has not been effective inthe context o f a single tranche adjustment operation and, hence, was rejected. C. IMPLEMENTATION 1. Partnershiparrangements As mentioned, the Bank and the IDBhave been collaborating closely inpromoting labor and social sector reforms in Colombia since 1998. To illustrate, the two institutions are financing inparallel two ongoing social protection projects (Familias en Accidn and Empleo en Accidn). The teams have hadjoint policy 6  dialogues on these reforms with the GOC. The teams also share information and ideas and consult each other on key issues. While the IDB i s financing an innovative youth training project (Jdvenes en Accidn), the Bank through its analytical work on public training has pushed for the reform o f SENA that would facilitate the expanded application o f the principles o f the Jdvenes en Accidn Project. The two institutions are also co-financing the updating o f SISBEN, Colombia's targeting system, and through this TAL, the evaluation o f Law 715. Looking forward, the GOC has asked the two institutions to work together on various social protection issues that the TAL would support. Finally, the TAL complements various studies initiated under the PHRD Grant. Annex 2 provides additional information. 2. Institutionalandimplementationarrangements Accounting and jinancial management system. Project financial management processes would be handled by the Project Implementation Unit (PIU) currently managing the IDB-financed Health Sector Reform Project (US$38.0 million) at the MSP. The PIU consists o f ten people. The financial team includes a Financial and Administrative Coordinator, a Financial Consultant and an Accountant. The role o f the latter two officials would be primarily to review and gather information prepared in the MSP for Component 1 and in the MEN and the DNP for Components 2 and 3. They would be responsible for maintaining project-specific records and managing project-specific processes such as, the preparation o f the consolidated financial reports, disbursement requests, tracking project funds, requesting and coordinating the financial audits with the Contraloria, and providing operational guidance to executing entities in charge o f implementation o f project activities. Project accounting responsibilities would be handled in each o f the executing entities (MEN, DNP, and MSP). The accounting o f the DNP and the MSP would be based on information received from the UNDP and FONADE. The consolidation process and reporting will be managed in Excel by the PIU at MSP. Financial management (FM) issues are discussed inmore detail inAnnex 7. Auditing arrangements. The financial audit for the project expenditures will be carried out inaccordance with Terms o f Reference prepared according to the audit policy o f the Bank in effect since July 1, 2003. The Terms o f Reference and the appointment o f the auditor are the responsibilityo f the MSP. For the project, a separate financial audit report will be required to be submitted for every year o f project implementation. The Contraloria i s the auditor for the IDB project. The 2003 audit report for this on- going IDB project has been completed. The report stated an unqualified audit report and the intemal control issues included were not significant. As required by local regulations, the same auditor will be appointed for the new operation. Disbursement arrangements. Assuming that an agreement i s reached between the Bank and the Government on Special Account (SA) issues across various projects, an SA will be established for the MENand MSP components. The DNPcomponent is expected to involve only direct payments to UNDP (these do not pass through the Special Account). 3. Monitoringand evaluationof outcomes/results Table 3a and 3b in Annex 3 present the results indicators by component. The PCU and the Technical Committee (Annex 6) would have responsibility for collecting and reporting M&E data, with participatingagencies providing necessary data, as stipulated inthe Operational Manual. 7  4. Sustainability The TAL i s one o f a series o f collaborative operations between the GOC and the Bank. Experience with these operations clearly indicates high and sustained GOC commitment towards social reforms. These reforms are being further advanced by the PLaRSSAL 11, and their implementation i s expected to be facilitated by the TAL. All the activities financed by the TAL are fully owned by the GOC and are consistent with its reform agenda, which i s currently being implemented. The results o f the labor and social reform programs and the capacity-building activities supported by the TAL are expected to be sustainable. 5. Critical risks and possiblecontroversialaspects Risk Risk mitigationmeasures Risk rating (*) with mitigation Risksto Projectdevelopment objective Underutilization of analytical outputs in the actual design and implementation o f reforms Risks to component results Lack o f fiscal space Inaddition to ensuring the GOC's full ownership ofthe S TAL and the reforms it supports, theproject cost i s limitedto an amount that the DNP andthe Ministryof Finance feel comfortable with. Lack o f coherence due to complexity of A signed Inter-Institutional Agreement (Annex 6) would multisectoral activities, involving govem the responsibilities and commitments o f the PCU S several ministries and autonomous and the participating agencies to facilitate coordination, agencies reporting and oversight o f TAL activities and their completion. This agreement would balance the need for central coordination and the desirability o f giving participating implementingunits autonomy. Delays due to bureaucratic controls in Draft terms o f reference and a Project Implementation the flow of funds andprocurement Plan (PIP) for various studies and other technical assistance activities are beingprepared and final S versions will be ready by loan effectiveness. Moreover, a Special Account would be established so that ministries in charge o f reform implementation have timely access to Project funds. Overall risk rating S (*) Riskrating: H(high),S (substantial) 6. Loanconditions and covenants Conditions o f effectiveness (a) that the Operational Manual has been issued and put into effect; (b) that the PCU has been established and properly staffed as set forth in Section 3.4(b) o f the Loan Agreement; and 8  Disbursements conditions (c) that the FONADE Agreement and the UNDP Agreement have been entered into by the parties thereto, for disbursement o f expenditures under category 1 and category 3 o f the loan agreement respectively. D. APPRAISAL SUMMARY 1. Economic andfinancialanalyses For a cost o f US$2.0 million, the benefits from the TAL are expected to be substantial. The benefits would consist of: (a) improved efficiency and equity inthe use o f public resources inbasic and secondary education, training and employment, health, and social protection; and (b) welfare gains from better implementation o f PLaRSSAL-supported reform o f labor and social sector regulations. The project would achieve these benefits through: (i)better knowledge, analytical instruments and consensus- building;(ii) increased capabilities o f the DNP, the MSP and the MENto analyze, monitor, evaluate, and manage their reform programs; and (iii) advances in citizens' oversight and feedback. In summary, it i s likely that the TAL would bring about substantial economic gains from greater transparency, social accountability, coordination and rationalization o f major labor and social programs and institutions. 2. Technical The project i s technically well designed; and a Technical Committee (Annex 6) consisting o f representatives from the DNP, the MSP and the MEN would be organized to review the quality and timeliness o f the TAL outputs. 3. Fiduciary Financial management issues An assessment of the central PIU's (inMSP) institutionalcapacity for financial management was carried out, which concluded that the organization o f the unit was adequate and satisfied the Bank's minimum financial management requirements. Two specific actions were recommended to further strengthen PIU management capacity: (a) coordination meeting(s) among the executing entities' financial teams to determine and agree on detailed operational procedures; and (b) completion o f the project's Operational Manual detailing procedures and requirements for the project accounting system, internal controls, planning, budgeting, financial reporting system, auditing, disbursement and use o f the international agency. On-site reviews o f the FM arrangements for the DNP and the MEN components will be carried out prior to loan effectiveness, although the MEN arrangements are considered to be generally adequate, considering its experience with the Bank-financedRural EducationProject. 4. Social The TAL does not have any negative social impact. On the contrary, it i s expected to contribute to greater social accountability, citizen's participation, and development results. 5. Environment The project does not have any environmental impact. It i s rated as Category C. 9  6. Safeguard policies Safeguard Policies Triggered by the Project Yes No ~ Environmental Assessment (OP/BP/GP 4.01) [I [XI NaturalHabitats (OP/BP 4.04) [I [XI Pest Management(OP 4.09) [I [X I Cultural Property (OPN 11.03, beingrevisedas OP 4.11) [I [I I InvoluntaryResettlement(OP/BP 4.12) [[XXI IndigenousPeoples (OD 4.20, beingrevisedas OP 4.10) [I XI Forests(OP/BP 4.36) [I [[XI Safety of Dams (OP/BP 4.37) [I XI ProjectsinDisputedAreas (OP/BP/GP 7.60)* [I [ XI Projectson InternationalWaterways (OP/BP/GP 7.50) [I [XI 7. Policy exceptions and readiness There arenopolicy exceptions,the project.is ready for implementation. * By supporting theproposed Project, the Bank does not intend to prejudice thePna1determination of theparties ' claims on the disputed areas. 10  Annex 1: Country and Sector Background 1. Since its economic crisis at the close o f the 20' Century, Colombia i s again achieving economic and social progress. With economic growth over 3 percent annually and a decline in the unemployment rate by 3 percentage points to 14 percent, poverty rates have begunto decline for the first time inseven years and security has improved, as indicated by a decrease in the number o f kidnappings and the increase in the presence o f government forces inthe more violent regions o f the country. 2. However, difficult challenges remain. Colombia continues to suffer from highlevels o f poverty and unemployment. Many children remain vulnerable to illness and, while substantial resources are spent on health, a high proportion o f families still do not have adequate protection against financial losses from illness nor access to good quality basic health care services. Moreover, Colombia continues to lag behind other competitor countries in terms o f the level and quality o f education and training, undermining its prospects for greater long-term competitiveness and growth. Complicating the situation i s the violent conflict that continues to consume a large portion o f the budget and leads to social strife, by displacing thousands o f citizens from their homes and increasing the burden on the country's still inadequate social protection system. 3. This annex briefly presents the key labor and social challenges facing Colombia and the PLaRSSAL- supported reform agenda. For additional details, the reader i s referred to the PLaRSSAL I1Program Document (PD). A. Labor and TrainingReform 4. Unemployment rates are falling, but still remain high. Rates fell from 15.7 percent in 2002 to 14 percent by 2003 and the average employment rate increased from 52.6 to 53.3 percent over the same period. To address the unemployment problem and its negative welfare effect, the Government i s focused on decreasing barriers to hiring new workers, increasing social protection o f workers, and improving employment opportunities inthe short and long runfor hard-to-employ groups. 5. This strategy i s being pursued through: the Labor Reform Law (789/02) approved in December 2002, labor market programs, and innovative policies and programs to improve national training, particularly the National Training Institute (SENA). The Labor Reform Law is breaking new ground by giving incentives for employers to increase employment through the reduction of: (i) non-wage labor costs to employers; and (ii) wage labor costs to employers. To protect the unemployed, the Law provides for the creation o f an unemployment insurance program. Thirty five percent o f these benefits would be targeted to unemployed informal sector workers - defined as not having had a previous affiliation to a Worker's Family Assistance Funds (CCF) and being registered in the SENA unemployment database. Also, the Law 789 obliges SENA to devote at least 25 percent o f its resources to train the unemployed. 6. Regarding on-the-job training, the GOC i s enhancing the targeting o f Colombia's training programs and i s working to improve the efficiency o f SENA. Recognizingthe special circumstances o f youth, two initiatives are underway: (i)implementation o f the reform o f the apprenticeship program; and (ii) institutionalization o f Jdvenes en Accibn, a program providing a training grant to poor young adults to participate in courses and apprenticeships provided by competing private firms. Moreover, the GOC has decided to develop a more efficient and effective national skills formation system by establishing a competitive process and level playing field among the public and private providers in the use o f the SENA training fund. To this effect, measures are underway to separate responsibilities in the provision, 11  financing, regulation, and accreditation o f training services. Inthe meantime, SENA i s making efforts to increase the efficiency o f its services by downsizing staff and making their contracts more flexible. 7. Remaining Challenges. To continue the reform process, the Government plans to implement the regulations o f L a w 789, principally those dealing with the apprenticeship program, unemployment insurance, and incentives to employers to hire hard-to-employ workers. Interms o f SENA, the GOC will embark on the challenging path o f designing and implementing the Comprehensive Job Training System, beginning with National Council o f Economic and Social Policy (COMES) document 81. The development o f information systems will be a key step inthis process. B. Social RiskManagement System Development 8. The GOC has been addressing a diverse set o f social protection programs that emerged in an ad hoc manner, leading to a duplication o f programs, poor targeting o f services, competing incentives, and general inefficiency. The Uribe administration, recognizing the desirability o f a more integrated and comprehensive approach to social protection -an issue highlighted in the Bank's Securing our Future and Colombia Social Safety Net reports -set out to implement a comprehensive social risk management system. The strategy, process, and institutionalarrangements are currently under development. 9. There have been several significant advances. First, the Ministry o f Social Protection (MSP) was established in February 2003, through the merger o f the Ministries o f Labor and Health, as the institutional backbone o f Colombia's evolving social risk management system. The MSP i s charged with consolidation o f the existing social protection programs by designing coordinated strategies and policies through public health, early childhood development, skills training, unemployment insurance, pension, and other labor-related initiatives. The MSP will oversee a variety o f previously uncoordinated agencies that provide the bulk o f social assistance and insurance protection in Colombia, including the Colombian Institute for Family Welfare (ICBF), SENA, and CCF. This effort i s expected to increase efficiency by eliminating duplication o f functions and defining an appropriate division o f labor. Currently, the MSP i s developing its mission, strategy, and operating procedures, while bringing in line the various programs and institutions for which it i s responsible. 10. In the meantime, a renewed effort to target the poor populations has emerged with the nationwide implementation o f the Sistema de Seleccidn de Beneficiarios (System o f Beneficiaries Selection, SISBEN) surveys to update municipal databases (started in 2003). This effort is expected to make the SISBEN Index significantly more accurate as a poverty status indicator and to improve its administration, auditing, and regulatory framework. Sanctions for false information and mismanagement o f the system are being contemplated. 11. Remaining Challenges. The institutional reform i s proceeding well, but it faces significant challenges over the next several years that will require skilled leadership and strong technical inputs to continue building the umbrella ministry and redefining the role o f each o f the semi-autonomous institutions. The political challenges will require dedication from all actors to continue defining the strategy and its implementation. The relationship between the Ministry o f Social Protection and its autonomous departments - SENA, ICBF, and CCF - i s still being defined, but efforts thus far by the MSP to define the strategy o f each department in relation to the Ministry, have been successful. In addition, the completiono f the new SISBEN i s crucial for improving targeting o f MSP programs; ifthis i s not done well, there will continue to be low coverage o f social programs for the most needy groups. 12  C. Early ChildDevelopment ICBF - 12. The GOC needs to ensure that ICBF resources are efficiently and equitably used and are well aligned with the goal o f establishing a well-targeted and efficient social protection system. The ICBF serves, among others, one o f the most vulnerable groups in Colombia -children younger than age seven from poor families -but structural problems with the ICBF require deep program reforms. In 2002, ICBF programs benefited nearly one million children - 85 percent o f whom attended community childcare centers (Hogares Comunitarios de Bienestar, HCB) -and distributedfood supplements to 2.3 million children on a regular basis. The impressive coverage rates mask the reality that: (i)targeting o f ICBF programs to poor families decreased after 1991, although this i s now being re~ersed;~ ten (ii) percent fewer children received services in 2002 than in 1998; and (iii) the quality o f inputs, and thus the quality o f services, was considered to be low until 1999. 13. ICBF i s undertaking three noteworthy measures. First, it has established quantitative targets increasing the share o f ICBF expenditures going to poor children. Second, it will undertake an impact evaluation o f its two major assistance and prevention programs: Desayunos Infantiles (children's breakfasts) and Hogares Comunitarios de Bienestar (Community Day Care). Third, based on the results o f the evaluation, the Institute will focus the use o f its resources on strategic, highvalue-added, and pro- poor programs. It i s noteworthy that the ICBF has decided that its nutrition programs for under seven year olds will be targeted to poor children. 14. Remaining Challenges. The ICBF and the MSP face the challenging task o f reorganizing the Institute's programs to improve and focus its services. Inthe meantime, it needs to fully and adequately implement the targeting strategy to shift its attention to the poorest children immediately. Also, with the new SISBEN, the ICBF will undergo the task o f reallocating services to those eligible families. The MSP i s supporting the ICBF in its analysis o f the appropriateness and feasibility o f adopting the Familias en Accidn Program.6 D. PublicHealth andHealthSystemReform 15. The GOC i s committed to strengthening public health. A national priority goal i s the establishment o f 95 percent immunization coverage rate o f 0-5 year old children by 2006. A second priority i s the continued implementationand completion o f the health systemreform, which calls for a transformation o f the healthcare financing scheme from supply side financing -where public hospitals are directly funded by the Government -to demand side financing where all individuals hold health insurance and are free to select their healthcare providers. 16. The GOC has taken several notable measures to protect families against illness and its financial and welfare consequences. First, Colombia is regaining its historically high immunization rates by: (i) protecting the budget for the purchase o f syringes and vaccines to cover the annual immunization targets and reach the 2006 targets; and (ii)clarifying the institutional roles in vaccination, improving coordination with the private sector's role, aggressive vaccination campaigns aimed at the municipal authorities, and effective implementation o f the Familias en Accidn (conditional cash transfers) program. Between 1992 and 1997, childcare coverage o f children belonging to urban families in the first income quintile decreased by 20 percent. World Bank (2002) Colombia Poverty Report. Report No. 24524-CO (World Bank: Washington, DC). Cash transfer program to provide incentives and means to families to enhance the education and nutritional status of their children, especially during crises. 13  17. Second, inpassing Law 715 o f 2001, Congress has mandated the re-initiation o f the transformation o f supply to demand subsidies in 2003. According to the Development Plan for the period between 2002- 2006, the national goal i s to expand insurance coverage among 3.0 million uninsured. The MSP estimates that the number o f individuals inthe Subsidized Regime i s now 12.9 million as o f June 30, 2003. 18. Third, with respect to the goal o f improving the quality o f health services, the MSP i s implementing a process for licensing o f health service providers or IPSs (Resolution 1439 o f October 2002, which defined quality standards by activity or hospital ward). The MSP also approved a regulatory decree to establish quality standards for ARSs (Subsidized Regime insurers) and has prepared legislation for EPSs (Contributory Regime insurers), which i s currently being discussed at the level o f the President. The decrees would establish tougher conditions for EPSs and, particularly, ARSs regarding financial requirements, capital levels and minimum number o f affiliates, thus eliminating non-viable insurance entities from the market. The implementation o f the quality assurance system will be complemented by an improved client-oriented health information system to allow people to make informed choices regardinginsurers and health care providers. 19. Remaining Challenges. The health reform remains a formidable challenge that will only be successful through patience and small steps. The immediate challenges are to expand the number o f affiliates in the Subsidized Regime, thus transferring more power to the consumer and encouraging competition and choice. This will also bringnon-affiliates among SISBEN 1-3 families into the system. The transformation o f the service providers to sellers in the health market will require the GOC to implement the hospital restructuring plan and continue the policy o f "no bailouts." The licensing and oversight o f the EPSs, ARSs, and IPSs are fundamental to give consumers the information and assurance that their insurance and health providers are o f high quality. A vigorous vaccination strategy must continue ifthe GOC i s to reach the goal o f 95 percent coverage by 2006. E. EducationReformImplementation 20. The interaction among education, training and technology i s the key to economic growth, but Colombia i s unlikely to benefit fully from technological innovations in the global economy due to its inefficient and under-performing education and training systems. The GOC i s committed to sustained implementation o f the education reform agenda and has made education development a highpriority. A key instrument to achieve greater coverage, improved teachers' performance, and higher student learning i s Law 715 o f the year 2000. This Law enables and encourages measures that reward more efficient use o f educationresources and more effective teaching. 21. The Law 715 mandated funding formula - based on number o f students rather than number o f teachers - has started to pressure the territorial entities and their schools to enroll more children or lose financing. To ensure that the incentive effect i s maintained over time, good information and verification systems are being developed to support the application o f the distribution formula. Complementing this effort, the Ministry o f Education (MEN) i s providing technical assistance to territorial Secretaries o f Educationto develop reliable databases for monitoring and evaluation purposes. The MENconfirms the enrollment information through cross-checking the data with the National Administrative Department o f Statistics (DANE) data and special audits when the MEN suspects inaccurate information. During 2003, 10 territorial entities were audited; in three cases, the difference in reported and actual enrollment rates was above five percent. The MEN plans to implement more systematic monitoring of the territorial entities and to disseminate information on the discrepancies. 22. The MENhas also entered into agreements with Secretaries o f Educationto help them to restructure their education systems to increase productivity - concentrating rationalization efforts in 42 territorial entities in2004. 14  23, Remaining Challenges. The full implementation of reforms will require organization and political skill. The new data collection and analysis system requires training o f administrators and audits until a culture o f evaluation and simple information systems are entrenched. The reorganization o f the education system (i.e. teachers) i s a sensitive, but necessary process that should be accompanied by performance incentives. Also, innovative teaching methods are an effective and high quality means to expand enrollment for certain groups, but implementation i s not trivial, and needs assistance from the MEN. All these efforts should be geared toward a continued increase inenrollments and improvement inquality. F. Transparency and Social Control 24. To improve the functioning o f social programs, the Government i s focused on the creation of scientific information on the quality o f publicly-provided services and its review o f and dissemination through non-governmental channels. This also entails the cultivation o f the "culture o f evaluation," where program information i s regularly collected and usedby the public for oversight. 25. Following on the CONPES document on evaluation andperformance management, the GOC plans to include a stipulation in the Organic Budget Law making periodic impact evaluations o f major social programs obligatory. Moreover, the National PlanningDepartment (DNP)i s inthe process o f developing a strategy for the implementation o f this mandate, including an international conference on the institutionalization o f periodic impact evaluation. 26. To complement the above measures, civil society and the GOC plan to create a modified version o f the successful Bogotd, Como Vamos? Program to strengthen citizen oversight and monitoring o f national programs. This i s consistent with the GOC's goal o f promoting social audits, which when carried out by citizens can be effective instruments against corruption, and improving efficiency, coverage, and quality o f public service delivery. 27. Remaining Challenges. The institutionalization o f a culture o f evaluation i s a long-term process requiring a change inpriorities and expectations o f Government and the public. It also requires building the foundations for a sustainable monitoring and evaluation system, including the creation of institutional capacity to supervise evaluations and in-house technical capacity to carry out evaluations; the generation o f adequate databases and information; and the building o f networks, with civil society, to monitor the process, disseminate findings and establish social control. To lay the groundwork for this, it i s important to establish a legal basis obligating social Ministries and Departments to undertake such evaluations and to build a civil constituency that will discuss, check, and disseminate the evaluation results and thus demand improvements intheir social services. 15  Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies A. BankAdjustment andInvestmentLendingoperations 1. Programmatic Labor Reform and Social Structural Adjustment Loan (PLaRSSAL). This ongoing operation i s a key part o f the Bank's Country Assistance Strategy insupport o f the GOC effort to raise the rate o f human capital accumulation, expand employment, and strengthen Colombia's social protection system. The specific reforms supported by the PLaRSSAL Program are summarized in Annex 1. The TAL supports the implementationo fPLaRSSAL I1reforms. 2. Social Sector Adjustment Loan (SECAL). This loan (approved on August 1, 2002, 7134-CO) firmly laid the groundwork for the new administration to continue, strengthen, and extend reforms aimed at increasing the pace o f human capital accumulation and the development o f a more comprehensive and efficient social protection system. The SECAL Implementation Completion Report' gave a "Satisfactory" overall performance rating to the program supported by the loan. The PLaRSSAL follows up on many o f the reforms supported by the SECAL. 3. Education Investment Loans. These operations include the Higher Education-Improving Access Project, approved on December 23, 2002, the Cundinamarca Education Quality Improvement Project approved on August 19,2003, and the Rural Education Project approved on April 11,2000 (Loan 7012). The first aims to increase enrollment in higher education. The second intends to reform Cundinamarca's education system to increase its efficiency, basic education coverage, and quality; it i s hoped that this would serve as a model o f how a territorial entity can better use its resources and authority under the amended decentralization law (Law 715). The Rural Education Project intends to strengthen the decentralization effort inrural areas. 4. Programmatic Fiscal and Institutional Adjustment Loan (FIAL). This ongoing program (Loan 7092) seeks to: promote reforms to relax fiscal rigidities; improve the provision o f public services; and establish the institutional basis for higher efficiency and accountability inpublic expenditure. The FIAL I1(Loan 7201) reinforces the incentives for efficiency gains in education and increases transparency in management contracts within the MSP, namely inICBF and SENA. 5. Social Safety Net ( U S ) Investment Loans. The Bank i s currently financing the Human Capital Protection Project' and the Community Works and Employment P r ~ j e c t . ~The former provides cash transfers to extremely poor families conditional on their children's enrollment in basic education and visits to health centers for basic care. The CAS has programmed a follow-up operation for FY05. The latter i s a workfare program that supports community projects to create opportunities for temporary employment for the poor unemployed workers. This workforce project now also finances a pilot wage subsidy program for employers who hire, in addition to their current workforce, poor unemployed workers. 6. Peace and Development Investment Loan. A recently approved (June 10, 2004) innovative lending operation that complements the PLaRSSAL i s the Peace and Development Project. This project assists communities in planning and implementing their own strategies for development in the context o f violence and conflict. The goal i s to implement an integrated strategy inhighviolence incidence regions 'Report No. 26004, June 2,2003. 8 LoanNo. 7050-C0, approvedMarch29,2001. LoanNo. 7017-C0, approved May 11,2000. 16  that goes beyond pure assistance for the displaced population, and reduces the vulnerability o f the population. B. Complementaritieswith Other Institutions'Operations 7. The GOC closely coordinates Inter-American Development Bank (IDB) and World Bank support for the reform of the social sectors. The Bank and IDB teams continue to have a good working relationship on labor and social reform issues. Collaboration in the implementation o f the R A S program, financed in parallel by both banks, remains strong. A single monitoring and evaluation model o f the RAS program i s being utilized by the GOC and the teams regularly consult each other regarding the GOC's social sector reform program. In December 2003, the IDB completed a Social Emergency Program (US$1.25 billion) which focused on: (i) budget protectiono f key social programs in education, health, and social assistance; and (ii)social sector efficiency and equity inseveral key programs. 8. Currently, the MSP i s implementing two IDB health loans. The Health Reform Support Program (Programa deApoyo a la Reforma), which has been under implementation for several years, is supporting the design and implementation o f an information system for the sector. Inearly 2004, a Hospital Restructuring Project was approved (US$72.0 million) to finance the public hospital restructuring processes to make the network o f public health care facilities more competitive and able to sell their services to insurers in both the Subsidized and the Contributory Regimes. These investment loans are supporting activities that are complementary to those the Bank would support on the policy side with the second phase o f the PLaRSSAL, specifically: the achievement o f immunization rates, the expansion of the Subsidized Regime, and the licensing and accreditation o f hospitals and clinics. C. TechnicalAssistance: PHRD versus TAL The TAL will expand and deepen many o f the technical assistance activities financed by the Japanese Trust Fundon Policy and HumanResources DevelopmentFund(PHRD) insupport o f the preparation of PLaRSSAL (see Table 2.1 for examples). 17  Table2.1 TAL and Other Technical AssistanceActivities InSupport of PLaRSSALReforms AAA-0ther PHRDJapaneseGrant TAL Project ~~PLARSSAL Objectives Project A. Institutiono f an effective Social ESW on Safety hitial diagnostic studies of Zomponent 1. Protection System. Vets inColombia, nstitutions, programs, MSP RAS Projects. :argeting instruments. B. Greater access ofpoor children ESW on Safety Study on targeting o f Zomponent 1. to ICBF programs. Nets inColombia, xograms for small vulnerable MSP IDB support for :hildren. SISBEN. C. Achievement o f at least 95 o f Support from Study on factors affecting (Support from immunization (PAI) coverage PAHO, and IDB :overage o f PAI. PAHO, IDB (0-5 year olds). HealthReform Health Sector Project. Reform) D. Advances inimplementation of ESW on health, Study on efficiency, equity (Support from healthreform, expanding IBDHealth Sector andquality o f general health IDBHealth insurance for the poor, reducing Reform. system. Reform subsidyto public hospitals, and Project) ensuringquality o f services. E. Implementationo flabor and ESW on Impact o f Study for the design o f the Component 1. training reforms, and improving SENA and general training system in MSP social protectiono f workers. Technical Colombia. Training in SENA, ESW: Evaluation of reforms. Programmatic Analysis o f consistency o f Component 2, reforms. AAA on results o f achievement tests. MEN education. Study o f the audit and verification process o f submittedenrollment data. Evaluation o f Adaptation and pilot testing Component 3 social control o f social R A S programs; o f Como Vamos concept. DNP programs. Review o f World Bank experience, U S experience, other; International conference on institutionalization o f impact evaluation. 18  Annex 3: ResultsFrameworkandMonitoring Table 3a. PerformanceIndicatorsby Component PDO Outcome Indicators Use of OutcomeInformation DNP, MSP, and MENhave the Advances inthe implementation and Gauge advances inthe knowledge, effective instruments, monitoring/evaluation o f implementation o f PLaRSSAL and ability to implement the labor PLaRSSAL prior actions on labor, supportedreforms and and social sector reforms supported social protection, health, education, monitoring/evaluation after by the PLaRSSAL. and training reforms. completion o f the adjustment loan. Increase innumber o f sociaUlabor programs under DNP,MSP, and MENbeing systematically and rigorously monitored, evaluated and discussed with the public for citizens' oversight and feedback- relative to baseline. Intermediate Results ResultsIndicators for Each Use of ResultsMonitoring One per Component Component ComponentOne: MSP has strengthened capacity to Implementation o f the *Establishment o f enabling implement a coherent social recommendations on the roles o f regulations and other norms defining protection reform that encompasses different concerned agencies (e.g., new NTS and guidelines for employment, training, health and MSP, MEN, and SENA) basedon application. social assistance for the poor and the guidelines proposed inthe *Inputs into pilot testing ofNTS and vulnerable. National Training System (NTS) employment programs. Report. Improved designand *Report on ways to improve the implementation o f the wage subsidy implementation o f wage subsidy and and unemployment subsidy unemployment subsidyprograms. programs. *Inputsinto pilot testing for the implementation o f the guidelines proposed to improve the wage and unemployment subsidyprograms. Integration o f the existing network *Updated inventory o f institutions o f service providers to vulnerable and programs (public and NGO) of populationwithin the Social social assistance. Protection System. Promotion, at the regional level, o f *Study o f coverage, effectiveness an integrated, coherent and and impact o f social assistance coordinated public management o f programs and recommendations for the National Protection System improvement. policies. Strategy to strengthen the operation, *Based on inventory and study, technology and capabilities o f the issuance o f enabling regulations and SPS agencies and actors. guidelines establishing reforms and new assistance programs mandated by the MSP to implement new policies on targeted and integrated programs. 19  Number ofprograms under the MSP *Workshops, conferences and short being systematically monitored, :ourses that will set standards on the evaluated and discussed with the procedures o f social protection public for citizens' oversight and policy. feedback relative to baseline. *Workshops, short courses and training events that will effectively transfer know-how and innovative approaches to the SPS. *Study to determine: (a) M&E indicators for different institutions and programs under MSP; and (b) baseline data for said indicators. *Inputsfor the construction o fM&E indicators and guidelines to be followed by implementing agencies. ComponentTwo: The Ministryo f Education (MEN) Analysis o f the accuracy o f *Inputsfor the improvement of has strengthened capacity to enrollment data and report on ways enrollment reports inorder to implement education to improve the quality o f enrollment maintain the integrity and efficiency decentralization reforms mandated data. effect o f the capitation system o f by Law 715, analyze primary and allocating education transfers secondary school integration and mandatedby Law 715, evaluate the school readiness o f 5- year old children. Assessment o f the system o f revenue *Gauge the weaknesses and effects transfers for education to territorial o f the implementation o f Law 715 entities under Law 715. on the equity and efficiency o f the use o f education transfers by territorial entities; and identification o f remedies. Study on the administrative and *Identification o f conditions under education quality impact o f which the integration policy may or regulations mandating integration o f may not work to help the MEN primary and secondary schools. make necessary adjustments to improve effectiveness and efficiency. Diagnostic study on basic *Development o fpedagogical competencies o f children age 5 guidelines for preschool education entering preschool education in (not available today). public schools. ComponentThree: The DNP has strengthened capacity Assessment o f the system o f revenue *Identify whether remedial measures for institutionalizing periodic transfers for health and education to are needed to strengthen or evaluation and monitoring o f social territorial entities under L a w 715. complement the impact o f Law 715 programs for citizens' oversight and on health and education. feedback. Design, pilot testing, and *Advance the development and implementation o f a Social Control institutionalization o f results-based System (SCS) for Colombia. management, transparency and social accountability. 20  e, > s s m vi vi m $ s s m II) m vi m s 2 ~ 0 m m  g N N m s s 0 In 0 r- .-c  I I Lc x m (u  Table 3c. AdditionalApplicationsof M&E:Indicatorof ProgressinResultsManagement PROGRAMS BASELINE TARGET VALUES Impact Evaluation Current evaluations YR1 YR2 YR3 DNP-MSP 1 Familias en Accidn November Intermediate Final evaluation 2004 evaluation Empleo en Accidn 1E i E t i a t e IFinal evaluation I 1 Labor Reform (Law 789,2002) I I 1seminar and I feedback) Evaluation o f training system Follow upto Initiated 1 (Completed) Bank-GOC study Evaluation o f the national Initiated 1 (Completed) programs for aging and older people MEN Evaluation o f pre-school 1 (Completed) children's abilities and competencies Workshop to disseminate and 1(Completed) get feedback on the study on effects on pedagogical administration, organization and school practices of Institutional Integration in different kinds of DNP Evaluation o f the impact of None 1 (Completed) transfers for health and education Results Monitoring Monitoringresults of the 3 4 4 4 National Development Plan 24  Annex 4: DetailedProjectDescription 1. This annex provides details on each o f the three loan components: (a) technical assistance to the Ministry of Social Protection (Component 1); (b) technical assistance to the Ministry of Education (Component 2); and (c) technical assistance to the National Planning Department's (DNP) Policy EvaluationUnit (Component 3). Component 1: TechnicalAssistance for MSP(US$1.1Million in ProjectCosts). Objectivesand Outputs of Component 2. The objective o f this component is to strengthen the new Ministry o f Social Protection's (created by merging the Ministry o f Health and Ministry o f Labor in December 2002) capacity to implement a coherent social protectionreform that encompasses employment, training, health, and social assistance to the poor and vulnerable by: (a) improving the functioning o f the labor market through the new labor reform law, designing and implementing a National Training System (NTS) that i s more responsive to firms, individuals, needs, and implementationo f selective active labor market policies; (b) improving the efficiency and impact o f social assistance to certain vulnerable groups including young children, adolescents and the elderly poor; (c) improving the Social Protection System (SPS) finance structure; (d) promoting the integrated and coherent public management o f Social Protection System policies, at the regional level; and (e) designing and implementing a Monitoring and Evaluation system for social programs and institutions that are under the responsibility o f the MSP. Coordination o f said programs and institutions i s an enormous institutional challenge for the MSP, as most o f these programs are runby semi/autonomous agencies like the ICBF (Institute for Family Welfare), SENA (National [Technical] Training Institute) and the Cajas de Compensacibn Familiar (Worker's Family Assistance Funds). 3. The main outputs o f this component include: the preparation o f new training and active labor market policies that are better aligned with private sector needs and the needs o f individuals and the preparation o f regulations and other normative acts to implement such policies; the preparation o f an updated inventory o f institutions and programs that provide social assistance to vulnerable groups, to improve program coordination and the impact o f integrated programs; the preparation o f a study o f coverage and other characteristics o f social assistance programs and recommendations for improvement; and finally, the introductiono f monitoring and evaluation systems for institutions and programs under the Ministryo f Social Protection. 4. A number o f key milestones (outputs) would be monitored to gauge progress towards meeting these goals. They include: 0 Enactment o f Reglamentos and other normative acts to launch and start implementation o f the new National Training System (NTS), clearly defining responsibilities o f different agencies, including the MSP, the MEN, SENA, and other executing agencies. 0 After completion of the inventory o f social assistance institutions and programs, development o f a clearly defined social protection policy reform agenda to improve the alignment, design, effectiveness, poverty impact and cost o fprograms. 0 Completion o f report on ways to improve the implementationo f the wage subsidy and unemployment insurance programs. 25  Establishment o f legal instruments and technical documents to implement the M&E system for programs and institutions under the MSP. This includes regulations for providing information, auditing systemto ensure data quality, survey data to be gathered, and parameters for informationsystems. 0 Establishment of legal instruments and mechanisms to implement the M&E system for programs and institutions under the MSP. This includes regulations for providing information, auditing system to ensure data quality, survey data to be gathered, and parameters for information systems. Main Activities supported by Component 5, This component will provide technical assistance to the MSP to ensure timely, sustained, and effective implementationof labor, training, social assistance reforms and monitoring and evaluation systems. Most technical assistance will deepen and begin to implement the studies and strategies developed with PHRD support, and with assistance recently providedby other donors (e.g., IDBHealth Sector Reform Loan, see below Table 2.1). Specifically, it would finance the hiringo f consultants who would work with the MSP to: 0 Undertake diagnostic studies and develop alternative institutional and organizational arrangements for a national training system that i s more attuned to private sector needs; and implementation o f active labor market policies, including the wage subsidy and unemploymentprograms; 0 Develop the implementation strategies, action plans and instruments needed to reform the programs in the ICBF, SENA, Cajas de CompensacidnFamiliar and others in order to improve coordination, eliminate duplication and achieve greater program impact; 0 Undertake studies to evaluate the impact o f the SPS financial structure and develop policies for improvement; 0 Host workshops, conferences and short courses that will set standards at the regional level for the procedures o f a social protection policy that would allow for an integrated and coordinated public management o f the Social Protection Systempolicies; 0 Develop a system o f output-based indicators for following up progress in the achievement o f agreed social protection system targets; and establish an M&E system for the main social protectionprograms under the MSP, including development o f key household surveys for said purpose; and 0 Host workshops, short courses and training events that will effectively transfer know-how and innovative approaches to implement the M&E system. 26  e e e e a e a e a a a e a a a e e a e a e e e  .... 0 . e . . . 0 . . . e . e e e  Component2: TechnicalAssistance to MEN(US$450,000 in ProjectCosts). Objectives and Outputs of Component 6. The objective of this component i s to strengthen the MEN'Scapacity to implement five key reform activities supported by the PLaRSSAL Program. The first is to implement the education reform provisions o f Law 715, which transfers resources from the central government to departmental and municipal levels largely on the basis o f enrollment. While this allocation scheme i s a sound approach to improve efficiency and equity across territorial entities and to promote rationalization o f the teaching force, it requires highquality auditing and control systems to minimize fraud and manipulationand ensure the veracity o f the information. The second i s to review the socio/economic impact, equity, fiscal costs and fiscal effort o f territorial entities under the new revenue sharing system, to be done jointly with the DNP (Component 3). The third i s to improve the education delivery system, which mandated integration o f primary and secondary schools to improve the transition from primary to secondary education for students attending public schools. The fourth i s to improve education coverage rates by improving pre- school education (Grade 0) for children age five years. The final i s to improve the MEN'Scapacity to implement the education reform provision o f Law 715 by strengthening its capacity to monitor, evaluate and manage for results. 7. The main results o f this component include the accomplishment of a set o f activities: (a) the completiono f audits o f enrollment data for selected departments and municipalities and the preparation o f a list o f auditing requirements and protocols to be followed for continuous audits o f data; (b) the completion o f reports on the evaluation o f the fiscal transfer system for education (jointly with DNP); (c) the completion o f diagnostic study to improve management and quality o f integrated schools; and (d) completion o f the report on the basic competencies children age five have before entering primary school with recommendations for improvement to reduce repetitionand drop/outs at this level. 8. A number o f key outputshse milestones would be monitored to gauge the progress towards meeting the proposedinstitutional strengthening goals. They include (details are inTable 4.2): 0 Upon completing above-mentioned audit reports (item a above), development o f detailed guidelines for improved data collection, verification practices by departments and municipalities, and establishment o f penalties for non-compliance with norms and procedures. 0 Upon completion o f reports (item b above), development o f proposals, if recommended, for improvedtransfer system inthe education sector, to be done jointly with DNP. 0 Upon completion o f study (item c above), development o f policies and guidelinesto improve implementationo f the school integration initiative to improve school management and quality. 0 Upon completion o f report (item d above), preparation o f detailed guidelines and normative acts to improve pre-school education (Grade 0) in schools nationally. Main Activities supported by Component This project component will finance the following four key activities: Audit study o f the current process for collecting and verifying enrollment and other data used to calculate the amount o f education transfers to territories, to detect flaws in the process, and to take corrective actions. Based on this study, development o f a more adequate 29  system for data audits, safeguard procedures, and penalty schemes against fraud and manipulation; Evaluation study o f the socioeconomic impact, equity, efficiency, and fiscal costs o f the new transfer system for education. This will permit the development o f policies and implementation strategies to ensure that the decentralization reform actually leads to, among other things, school empowerment and motivation for quality improvements. This would be undertaken in coordination with the evaluation o f the transfer system in Law 715. The MEN and the DNP would examine the impact o f the new allocation scheme on pattems o f resource utilization, education outputs by territorial entities, and utilization o f the teaching force (see Component 3); Evaluation study o f the current system which mandates integrating primary and secondary education in the same school. Separate primary and secondary schools have been identified as a factor for reduced rates of transition o f students from primary to secondary education. The MEN mandated integration o f schools but very little i s known about the implementation o f the scheme and whether it has had an effect on child performance. The study would be based on a sample o f schools in selected municipalities and would use student achievement tests; and Evaluation study o f the basic competencies o f pre-school children. This study, which would be based on test results o f a sample o f small children, is expected to provide specific recommendations to improve curriculum and other education aspects to reduce the highrepetition and drop-out rates o f Grade 0 students. 30  n 3 z2 3 e . . . . e e . . a a a e a 3 m e . a a m e a e a a a e e  Component3: TechnicalAssistance to DNP (US$450,000 in ProjectCosts). Objectives and Outputs of Component 1. The objective of this component is to strengthen DNP's capacity for institutionalizing periodic evaluation and monitoring o f social programs for citizens' oversight and feedback. First, it will finance a systematic study o f the current revenue sharing systemmandated by Law 715 o f 2001 for early detection o f its impact on the patterns o f education and health spending o f territorial entities in terms o f equity, efficiency and their fiscal effort. The findings o f the study would be usedto determine whether and what remedial actions are needed. Second, this component would finance the continued implementation o f a Social Control System (SCS) for the national government, modeled after the Bogotd Como Vamos experience and enhanced with international experience on the subject. This activity complements and further strengthens DNP's Public Policy EvaluationUnit, which has already made significant progress in: (a) establishing a system to monitor progress against set targets for most central government institutions and programs covered in the National Development Plan; and (b) taking steps towards the institutionalization o f a system for impact evaluation o f major social programs, starting with the impact evaluation o f the Red deApoyo Social (RAS) programs, and forging a consensus in the GOC to include a requirement for periodic impact evaluation o f major programs in the Organic Budget Law. As with the other components, the SCS activities would follow up on studies and pilot tests supported by the PHRD, the PLaRSSAL 11,and other donors (Table 2.1.). 2. The main results o f this component include: (a) the completion o f the revenue-sharing system study with recommendations for improvements and remedial measures; and (b) the continued pilot testing and rolling-out o f the national SCS being designedby the DNF'. 3. A number o f key outputs/use milestones would be monitored to gauge the progress towards meeting the proposedinstitutional strengthening goals (see Table 4.3 below for details). Main Activities supported by Component Inaccordance with the above objectives, this component would support the following activities: 0 Evaluation study o f the general participation system (revenue sharing) regarding the adequacy o f the instrument and formula used, its impact on the patterns o f education and health expenditures, and neededremedial measures ( with the MEN,Component 2). 0 Detailed design, implementationand institutionalizationo f a Social Control System, based on the successful experience o f the Bogotd Como Vamos Program and enriched by the experience of other countries (e.g., the Citizen Report Cards of India, and other experiences in Indonesia, the Philippines and Brazil). 32  3 zs 3 n m Y 9E 0 a E % 0 En .... . . . . 0 Y W 0 f Y M .I m m M 4 I a V .I s .E, ; . . . Y .. 0 P 9B8 m 1 P h m * .I W . . . .I Y .I Y 4as a Y 6 m a W I 9 H  Annex 5: Project Costs Table 1: Project Costs Project Cost By Componentand/or Activity Total US $million Component 1. TechnicalAssistanceto MSP 1.A. Training and active labor market policies 172,800 Total 1 . . Front-endFee 1 0 TotalFinancingRequired 2,000,000 34  *Includes consultants for the different studies, consultants for the Central Project Coordination Unit at MSP; training includes workshops and seminars to disseminate studies (done by individual consultants or firms). Operational costs means the non-consultant expenditures incurred by Borrower in connection with the carrying out o f component 1 and with the daily operation o f the PCU, including office utilities supplies, materials andreasonable within city transportation costs, which expenditures would not have beenincurredabsent the project. 35  Annex 6: ImplementationArrangements 1. Implementationperiod The project i s expected to be implemented over a three-period, with a completion date o f June 30, 2007 and a closing date o f December 29,2007. 2. BorrowerandImplementationAgencies for the TechnicalAssistance Project The Borrower would be the Republic o f Colombia. The implementation agencies would be the Ministry o f Social Protection (Component l), Ministryo f Education (Component 2) and the National Planning the Department (Component 3). The MSP would house the Project Coordination Unit (PCU) for operations with responsibilities agreed upon by the other project participants (see below). The responsibilities and obligations o f the PCU and the participating units would be defined by a signed Inter-Institutional Agreement and stipulated in the Operational Manual. A TAL Technical Committee consisting o f representatives from each participating unit would be organized to review the progress and quality of the analytical work supported by the project. The Operational Manual will contain specific provisions on detailed arrangements for the carrying out the project, including: (i) the Inter-Institutional Agreement; (ii) guidelines for the preparation o f Annual Action Plans; and (iii) performance indicators. 3. ProjectManagement The TAL Project would not be managed by a separate specially created Project Implementation Unit (PIU). Instead, the project would be managed and implemented by the existing PrUs for other Bank or IDBProjects inthe Ministry o f Social Protection (Component l), Ministryof Education (Component the 2) and the National Planning Department (Component 3). Because the MSP has the largest share o f the project, it would serve as the PCU for communications with the Bank. Currently, the MSP i s managing two IDB loans, the Health Sector Reform Project and the Hospital Restructuring Project. The PIU for these projects would manage Component 1 and would also be the PCU for the TAL operations. Similarly, the PIU o f the Bank's Rural Education Project in the Ministry o f Education would manage Component 2, and finally the implementation unit o f the IDB Project, Programa Sectorial de Reforma Social at the DNP would manage Component 3 o fthe TAL Project. Technical Team. The project would be executed by the technical staff o f the Technical Vice-Ministry o f Social Protection, the Planning Office o f the Ministry o f Education and the Public Evaluation Unit (Sinergia) o f DNP. Each unit would implement its corresponding component and would be in charge of: (i)developing Terms ofReference for consultants; (ii) helping select consultants for analytical and advisory work to be financed by the TAL; (iii)evaluating and approving work; and (iv) developing methodologies to mainstream the results of such work. The technical coordination job for the whole project would be the responsibility o f the TAL Technical Committee formed by the Vice-Minister o f Social Protection, the Director o f Planning o f MENand the Director o f the DNP's Public Evaluation Unit with the support of DNP's Social Development Division. The Committee would coordinate the technical activities o f the project, ensuring the solidity o f their content and their consistency with the objectives o f the project. Operations Team. The head o f the PCU (the Director o f the PIU at the MSP) would be supported by an Operations Team and would be responsible for: (a) overall planning and supervision o f the project; (b) verifying that the operational procedures, as established in the Loan Agreement, are being complied with; (c) administering project activities, including agreements, and oversight o f contracts and procurement; (d) 36  preparing reports on financial performance and disbursement; (e) tracking project funds; (0 arranging for the Contraloria to do independent financial audits; (g) providing operational guidance to the units in charge o f implementation o f project activities; (h) supervising compliance with these guidelines; and (i) preparing progress reports on the project (including technical and operational activities, and compliance with operational guidelines) and submitting these to the World Bank every four months. To accomplish the requirements o f the project described above, the PCU will be staffed by MSP officials and will be headed by a Project Coordinator and assisted by adequate professional and administrative staff (including a procurement officer and a financial and administrative office). 4. ImplementationStrategy Implementation of Components. The project will support the following implementationmechanisms: 0 Contracts following the World Bank guidelines (suppliers and consultants). Most o f the US$2.0 million allocated to the technical components will be used to contract local andor international consultants (firms or individuals) for analytical and advisory work. The project will also finance training/workshops and operational costs such as expenditures for materials, utilities and rentals. Disbursements. Disbursement arrangements for all components will be determined in the upcoming mission. Table 1. DisbursementProjection 37  Annex 7: FinancialManagementandDisbursementArrangements FinancialManagement Country Issues. A Country Financial Accountability Assessment (CFAA) was delivered to the GOC in June 2004. The critical issues affecting projects include the tight fiscal situation, budget and administrative processes that can cause delays in implementation, and the national chart o f accounts which extends to sub-national levels o f government. At the project level, the Bank i s currently engaged with the Govemment in strengthening project financial management by: (i) improving the operation o f Special Accounts held in the Central Bank; (ii)decreasing the incentives to employ intemational cooperation agencies to manage project funds; and (iii) improving and streamlining the accounting and reporting requirements agreed in November 2002 between the Bank and the country's Accountant General and Auditor General's office. FMAssessment. A visit to the PIU of the existingIDB-financed project at the MSP was carried out on July 19, 2004. The conclusion was that the FM arrangements currently in place are adequate. An FM Assessment o f the other executing entities will be carried out before loan effectiveness. Organization/StafJing. The MSP will hire a Financial and Administrative Coordinator for the project. The Coordinator will work with the PIU, doing the general coordination o f the project. Staffing adjustments in the future will depend on the volume o f project activity and on any adjustments to the existing systems that may require additional clerical or technical staffkonsultant support. Written Procedures. The project will follow the Operational Manual that will be approved by the Bank. The executing agencies have sent a draft o f this document to the Bank. Accounting and Information Systems. As part o f the FM Assessment, the Bank will review each implementing entity's accounting and information systems that will be used for each project component. The current project management system consists o f three subsystems, each with the following functions: a) recording o f expenditures for the purpose o f SOE production and FMRproduction (Excel-based); b) recordingo fprocurement activities (Excel-based); and c) entry o f accounting transactions made ineach executing entity accounting. The FMAssessment o f the MENand the DNP will confirm whether enhancements should be considered to provide greater efficiency, control, and avoidance o f some risks. Financial Management Risk. The FM risk in this project i s considered to be Moderate. Loan size i s small, and the executing entities have generally good capacity and a good record o f financial management on other projects. Funds Flow and Cash Management. Subject to a country-level Special Account arrangement being agreed between the Government and the Bank, the proposed project will utilize a Special Account denominated inUSD with a corresponding account inpesos for the components to be implemented by the MEN and MSP. MEN will manage the pesos received from the Special Account through the budget process, while MSP and DNP will contract a local financial agency (FONADE) and an international agency (UNDP) respectively, to administer funds for their respective components. The DNP component is expected to involve only direct payments to UNDP (which, as mentioned, do not pass through the Special Account). Disbursement applications for all components will require approval from the central 38  PIU in MSP, which will also be responsible for the reconciliation o f the Special Account and general coordination o f disbursement matters. Financial and Management Reporting. The project will prepare Financial Monitoring Reports (FMRs) on a quarterly basis for intemal purposes, and inform the Ministry o f Finance (MHCP) o f project developments. FMRs for each semi-annual periodwill be sent to the Bank within 45 days after the end o f each such period (i.e., by August 15 and February 15). As part o f the FMAssessment, the Bank informed the PIUs that Resolution 380 o f 2002 was being reviewed by the national audit and accounting agencies with the Bank. The Bank would recommend some changes inthese FMRsto simplify them and improve their use for project monitoring. Part o f these changes would be to allow less frequent reporting to the Bank for relatively smalVsimple projects such as this TAL. Preparation o f the project financial reports can also be improvedby addressing information systems issues (as mentioned above). Finally, financial reports in FMRs will serve as a basis for the annual audit o f financial statements (see below). Disbursements Disbursement Mechanisms and Documentation. Assuming that an agreement i s reached between the Bank and the Govemment on Special Account (SA) issues across various projects, an SA will be established for the MENand MSP components, with the DN'Pcomponent expected to involve only direct payments to UNDP. The authorized allocation for the account will be equal to 10 percent o f the MSP and MENcomponents, although the initial deposit may be limited to a smaller amount until disbursements reach a certain level. Disbursements under the project will be made following the Bank's transaction- baseddisbursement procedures. Direct payment method will be usedfor very large contracts, as needed. Use of Statements of Expenditure (SOEs). Loan withdrawal applications will be supported by SOEs for all expenditures not requiringthe Bank's prior review. Retroactive Expenditures. Retroactive financing will be allowed for eligible expenditures (expenses relating to project activities, procured in accordance with agreed project procurement procedures) incurred within 12 months prior to the Signing o f the Loan. These can be claimed for reimbursement upon declaration of loan effectiveness. These expenditures will be limited to US$400,000 (20% o f the loan amount), but are expected to be much less than this amount. FinancialManagementActionPlan The most critical actions that need to be carriedout are the completion of the Operational Manual and the agreement with Contraloria on audit arrangements. Compliance with these issues along with the completion o f the FM Assessment for the MEN and DN'P will be confirmed by the Bank before loan effectiveness. 39  Annex 8: ProcurementArrangements A. General Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under BRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Loan Agreement. The general description o f various items under different expenditure categories are described below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank Project team inthe Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementationneeds and improvements ininstitutional capacity. Procurement of Works and Goods. Procurement o f goods and civil works contracts is not expected under this project. Procurement of non-consulting services. Contracts below US$50,000 equivalent for preparation and broadcast o f promotional clips may be procured usingshopping proceduresbased on a model request for quotations satisfactory to the Bank. Selectionof Consultants. Firms. Consultant contracts with firms will include diagnostics and other studies; impact and policy evaluations; data audit services; reviews o f legislation; training and workshops; specialized technical expertise and studies. Short lists o f consultants for services estimated to cost less than US$350,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o fparagraph 2.7 o f the Consultant Guidelines. Consultant assignments o f specific types as agreed previously with the Bank in the Procurement Plan may be procured with the use o f the following selection methods: (i) Quality and Cost Based Selection; (ii)Selection under a Fixed Budget - SFB; (iii) Least Cost Selection - LCS; (iv) Selection Based on Consultants' Qualifications - CQS (for contracts estimated to cost below U S $200,000 equivalent); and, exceptionally (v) a contract under Single Source Selection - SSS procedures, has been identified. The SSS will be justified under the circumstances explained in paragraph 3.9 o f the Consultants' Guidelines. Individuals. Individual consultants will be hired to provide technical advisory and project support services and selected in accordance to Section V o f the Guidelines. Operations Costs. These costs will include project-related travel expenses, office supplies and consumables. Costs will be executed usingthe implementingagency's administrative procedures reviewed and acceptable to the Bank. B. Assessment of the involvedagencies' capacityto implementprocurement Project Management Units. The TAL project components will be managed by three already existing separate PIUs for other Bank or IDB Projects: the MSP, MEN, and DNP will implement components 1,2 and 3 respectively. The MSP will act as Project Coordination Unit. Procurement for Component 1 will be executed by the existing PIU that manages Bank-fundedhealth projects; 40  MSP will hire FONADE, also currently executing one Bank-financed project; and DNP will use UNDP services. The cost o f FONADEand UNDP services will not be financed under the Loan. Procurement Assessment of the agencies expected to be conducting procurement activities. Considering that MENi s currently implementingtwo projects financed by IBRD, a procurement capacity assessment o f its PCU has not been conducted. Given the non-complex character o f the procurement operations that FONADE and UNDP are going to execute under this loan and their experience with Bank-funded projects, it i s also advisable not to conduct a procurement capacity assessment o f said organizations; it i s recommended to conduct, instead, a session o f procurement training on Bank's new guidelines for selection o f consultants before implementation starts. C. ProcurementPlan The Borrower, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan has beenagreed between the Borrower and the Project Team on August 29, 2004. It will also be available in the project database and in the Bank's extemal website. The Procurement Plan will 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 In addition to the prior review supervision to be carried out fi-om Bank offices, the capacity assessment o f the Implementing Agency recommended one normal supervision mission (annually) to visit the field to carry out procurement consultation and post review o f procurement actions, and one special supervision mission incase of catastrophic events. 41  Attachment1 Detailsof the ProcurementArrangementinvolvinginternationalcompetition. (a) List of ConsultingAssignments with short-list of internationalfirms. 1 2 3 4 5 h 7 Ref. No. Description of Estimated Selection Review Expected Comments Assignment cost Method by Bank Proposals (Prior I Submission Post) Date Impact The firm is TBD* Evaluation of $430,000 Sole source Prior January to be General review 2005 previously Participation selected on a System competitive basis under a process financed by IDB *Borrower will create the code or alphanumeric IDfor each tender (b) Consultancyservices estimated to cost above US$350,000 per contract and Single Source selection o f consultants (firms) will be subject to prior review by the Bank. (c) Short lists composed entirely of national consultants:Short lists of consultants for services estimated to cost less than US $350,000 equivalent per contract, may be composed entirely o f national consultants inaccordance with the provisions ofparagraph 2.7 ofthe Consultant Guidelines. 42  Annex 9: Economicand FinancialAnalysis For only US$2.0 million, the benefits from the TAL are expected to be substantial. The benefits would consist of: (a) improved efficiency and equity in the use o f public resources in basic and secondary education, training and employment, health and social protection; and (b) welfare gains from better implementation of PLaRSSAL-supported reforms o f labor and social sector regulations. The project would achieve said benefits through: (i) better knowledge, analytical instruments and consensus-building; (ii) increased capabilities o f the DNP, the MSP and the MENto analyze, monitor, evaluate, and manage the results of their reform programs; and (iii)advances in citizens' oversight and feedback. Insummary, it is highly likely that the TAL would bringabout substantial economic gains from greater transparency, social accountability, coordination, and rationalization o f major labor and social programs and institutions. 43  Annex 10: ProjectPreparationandSupervision Planned Actual PCNreview July 1, 2004 July 1,2004 InitialPID to PIC July 1, 2004 July 12,2004 Initial ISDS to PIC July 1,2004 July 12,2004 Decisionmeeting July 27,2004 July 27,2004 Appraisal July 27,2004 Aug 28,2004 Negotiations August 16,2004 Aug 27,2004 BoardRVP approval November 4,2004 Planned date of effectiveness October 6, 2004 Planned date of mid-termreview January 15,2005 Planned closing date December 29,2007 Key institutionsresponsiblefor preparationof the Project: DNP,MSP, MEN Bankstaff and consultantswho workedon the Projectincluded: Name Title Unit Vicente Paqueo Lead Economist LCSHS Wendy Cunningham Senior Economist LCSHS Jeannette Estupinan Financial Management Specialist LCOAA Mariangeles Sabella Legal Counsel LEGLA Juan Carlos Alvarez Legal Counsel LEGLA Martha Laverde Sr. Education Specialist LCSHE Jose M.Martinez Procurement Specialist LCOPR Harry Patrinos Senior Economist LCSHE Daniel J. Boyce Sr. Financial Management Specialist L C O M Jairo A. Arboleda Sr. Social Development & Civil Society LCCCO Specialist Maria Luisa Escobar LeadHealth Economist LCSHH Mauricio Santamaria Senior Economist LCSPP Gladys Lopez-Acevedo Senior Economist LCSPP Tarsicio Castaiieda Consultant Martha P. Vargas Team Assistant LCSHD Sonia Levere Language Program Assistant LCSHD Bankfunds expended to date on Projectpreparation: 1. Bankresources: $50,000 2. Trust funds: none 3. Total: $50,000 EstimatedApprovalandSupervisioncosts: 1. Remainingcosts to approval: $45,000 2. Estimated annual supervision cost: $50,000 44  Annex 11: Documentsin the ProjectFile 1. Draft Operational Manual for the PCUand ImplementingAgencies 2. Procurement Plan for DNP,MEN, and MSP 3. Financial Terms Sheet 4. Program Document for the SecondProgrammatic Labor Reform and Social Structural Adjustment Loan 5. Minutes of the Concept Review Meeting for the TAL (June 16,2004) 6. Minutes o f the QER Meetingfor the TAL (July 9, 2004) 7. Memo from Juan David Quintero, QAT Coordinator on Environmental and Social Comments (July 21, 2004) 8. Minutesof the Decision Meeting for the TAL (July 27,2004) 9. ISDS - Concept & Appraisal stage 10. PID-Concept & Appraisal stage 45   Colombia Statement ofIFC's HeldandDisbursedPortfolio As ofApril 21,2004 Held Disbursed FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 2002 BCSC 0 7.00 0 0.00 0 7.00 0 0.00 2002 Bavaria 70.00 0 30.00 145.00 70.00 0 30.00 145.00 1969/1985/1988/ CF del Valle 0 7.44 0 0.00 0 7.44 0 0.00 2001 CHMC 0 9.68 3.45 0.00 0 4.02 1.00 0.00 2004 CartonesAmerica 22.00 0 0 0.00 18.00 0 0 0.00 1974/2001 CementosCaribe 3.71 9.84 0 9.07 3.71 9.84 0 9.07 1995/1999 Corfinsura 31.53 0 25.00 0.00 6.53 0 25.00 0.00 2002 lnversura 0 15.00 0 0-00 0 15.00 0 0.00 2002 OmimexOil 30.00 0 5.00 0.00 10.70 0 5.00 0.00 I987 PRODESAL 0 0.59 0 0.00 0 0.59 0 0.00 1977/1989/1992/ Promigas 3.13 1.13 0 2.08 3.13 1.13 0 2.08 1994/1995/2002 Promisan 0 0.20 0 0 0.20 0 0.00 2002 Proteccion 0 10.00 0 00.oo .oo 0 10.00 0 0.00 1996 Proyectos 0 0.00 0 0.00 0 0.00 0 0.00 2002 SIG 25.00 0 50.29 0.00 25.00 0 50.29 0.00 1999 Surentina 0 5.10 0 0.00 0 2.50 0 0.00 2001 Tolcemeito 3.33 0 0 7.11 0.00 0 0 0.00 47  Annex 13: Country at a Glance Colombia at a glance 9f3f03 Latin Lower- POVERTY and SOCIAL America middle- I Colombia h Carib. income Development diamond' 2002 Population. mid-year /?n&".c? 43.7 527 2,411 GNI per capita /Afla+"t LLW? 1.830 3,280 1,390 Life expectancy GNI /At!ac&M L+Wh!bY"s? 80.1 1,727 3,352 Average annual growth. 1996-02 T 1.8 1.5 1.0 Labor force pi? Population pi? 2.6 2.2 1.2 GNI Gross Most recent estimate (latest gear available. 1996-021 per primary capita nrollment Poverty p i ' d p i p d a h h & w n a h d ~ ( # ~ Urbanpopulation fli'dt&dpr@c?l/ 76 76 49 Life expectancyat birth [+ea-?? 72 71 69 I Infantmortality /bwIKt?.&wA+f&? 19 27 30 Childmalnutritionf l : ' E a r W " & f f? 7 9 11 Access to improved water source Access to an improved water source p'Orpr@ai 91 86 81 Illiteracy fli'dpr@&htw~5+ 8 11 13 Gross primaryenrollment fl:'cd-cdwdvpr@at 112 130 111 Male 113 131 111 Female 112 128 110 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1982 1992 2001 2002 GDP /CLWM%xq? Economic ratios' 39.0 49.2 82.4 82.2 Gross domestic inuestmentjGDP 20.5 16.7 14.9 Exports of goods and servicesfGDP 10.9 17.7 19.4 Trade Gross domestic savingsfGDP 16.3 18.7 15.3 Gross nationalsauingsfGDP 13.6 18.4 14.3 Current account balancefGDP -8.4 1.8 -2.2 -2.2 Interest paymentsfGDP 1.8 2.6 3.0 2.4 Total debtfGDP 26.4 35.1 44.5 Total debt seruicefexports 27.8 38.8 36.1 Present value of debtfGDP .. 45.6 Present value of debtfexports .. 215.5 Indebtedness 1982-92 1992-02 2001 2002 2002-06 /MW" W m W GDP 4.0 2.0 1.4 1.5 0.4 GDP per capita 1.9 0.1 -0.3 -0.1 -1.1 Exports of goods and services 10.1 4.8 4.1 STRUCTURE of the ECONOMY I fl:'dmFy 1982 1992 2001 2002 Growth of investment and GDP [% Agriculture 19.3 15.8 13.0 20 Industry 31.8 35.0 29.9 0 Manufacturing 21.8 19.8 16.3 -20 Services 48.9 49.3 57.1 -40 I Private consumption 72.8 71.8 63.6 I General government consumption 10.9 9.5 21.1 Imports of goods and services 15.2 15.8 19.0 - GO1 -GDP 1982-921992-02 / M q e mdg&q Growth of exports and imports [ X I Agriculture 3.5 -1.4 0.1 "T Industry 5.0 0.7 -0.1 Manufacturing 4.2 -2.1 .0.8 Services 3.5 3.4 2.1 Private consumption 2.9 1.5 1.9 V General government consumption 4.8 9.6 0.3 Gross dimestic investment 1.0 -2.9 9.6 Imports of goods and services 2.9 3.1 11.2 -Export$ -Import$ Note:2002 data are preliminaryestimates. This table was producedfrom the Development Economics central database. 'Thediamondsshowfourkeyindicatorsinthecountry[inbold]comparedwithitsincome-groupaverage.Ifdataaremissing,thediamondwill be incomplete. 48  PRICES and GOVERNMENT FINANCE 1982 1992 2001 2002 L?"?sfiCpiCes Inflation (XI I pi'&aq& 25 Consumer prices 24.6 25.1 6.5 6.0 20 Implicit GDPdeflator 24.8 23.6 7.6 7.0 15 10 Gcwei-af &dJ3GP 5 & ~ d L x 5 ? iwd.k+ec cWfm-wa.7t-y) I 0 Current revenue 13.7 13.3 13.6 4? 48 44 00 01 Current budget balance 3.0 -5.0 -3.7 Overall surplus1deficit -1.9 -6.1 -4.6 -ODP deflator -CPI TRADE 1982 1992 2001 2002 I (L"?I Export and import leuels [US$ mill I Total exports [fob] 3,264 7,263 12,309 11,903 Coffee 1,562 1,259 764 991 I 20m0 T Petroleum 215 1,396 3,083 3,037 15.000 Manufactures 837 2,272 5,606 6,156 Total imports [cif] 5,478 6,627 12,834 13,026 10.000 Food 303 450 1,578 1,161 Fuel and energy 659 344 189 233 5.000 Capital goods 2,048 2,255 4,468 4,528 0 Export price index [M=A?f?) 9 63 243 46 47 4 8 44 00 01 I 2 Import price index (M=A?f?I 8 69 209 Terms of trade [M=A?f?? 115 91 116 Exports Imports BALANCE of PAYMENTS 1982 1992 2001 2002 Current account balance to GDP I ,1 Imports of [&mi?a!%m:I Exports of goods and services 4,785 9,257 14,932 14.439 , Resource goods and services 7,052 8,262 15,840 16,077 '1 ,1 balance -2,267 994 -908 -1,639 Net income -1,184 -1,852 -2,975 -2,525 Net current transfers 171 1,734 2,094 2,335 Current account balance -3,280 876 -1,789 -1,828 Financingitems [net] 2,930 450 2,956 1,323 Changes innet reserves 350 -1,326 -1,166 505 Memo-- Reserves including gold {LWmXhLyl 10,245 10.649 Conversion rate [EiZ&&fXfI 64.1 681.0 2.299.8 2,504.2 EXTERNAL DEBT and RESOURCE FLOWS ' [ 1982 1992 2001 2002 L W ~ y ~ Composition of 2001debt [US$ mi Total debt outstanding and disbursed 10,306 17,277 ' 36,699 IBRD 1,346 3,195 2,006 IDA 20 13 7 3738 2006 ? Total debt service 1,491 4,008 6,297 IBRD 187 959 365 I IDA 1 1 1 ' Composition of net resource flows Officialgrants 12 89 86 Officialcreditors 403 -413 1,083 Private creditors 856 -12 1,312 Foreign direct investment 366 729 2,328 u Portfolio equity 0 0 -43 24363 World Bank program I Commitments 738 466 636 A . E -6ilatcral Disbursements 277 262 368 IBRD D-Other F -Private Principal repayments 93 681 233 -. B IDA multilatcral 0 -Short- Net flows 185 -420 135 I. .r Interest payments 95 278 133 Net transfers 90 -698 3 Note: This table was produced from the Development Economics central database. ~ 913103 49